LETTER | Gov't support and financial packages to save local airlines

LETTER | It is vexatious and appalling to hear that the current environment with the Covid-19 pandemic has impacted the world economy. The government in many countries had taken necessary action to provide stimulus packages to face the current challenging economic issues. 

Malaysia as a nation is also facing the effect on the economy caused by the Covid-19 pandemic. The front liners in Malaysia that initially seen to be affected by the pandemic was the tourism sector, with the airlines like MAS, Malindo Air and AirAsia were reported to have been adversely affected by the pandemic. 

It was announced by the International Air Transport Association (IATA) that the world airlines would be making a loss of US$113 billion in revenue due to the Covid -19 pandemic in 2020. 

In Malaysia, it was reported that the tourism industry is making a loss of RM3.13 billion if the Covid-19 pandemic continues until May this year. What are the implications for the local airlines?

On Mar 17, 2020, the then transport minister Anthony Loke said that “the government should extend financial assistance to local airlines that are suffering losses due to flight cancellations and travel restrictions from the Covid-19 crisis”. 

As a Logistician, I totally agree with what Loke had said. We could see the three Malaysian major airlines - MAS, AirAsia and Malindo Air - are suffering due to the pandemic. As reported, MAS has informed its employees that the Covid-19 crisis had left the local airlines in a critical situation and putting it at risk of bankruptcy. 

Now MAS is operating at a 20 percent capacity, while AirAsia is running at 10 percent capacity locally and Malindo is operating at 15 percent capacity. It is crucial for these three airlines to survive within the next three months.

As reported, Covid-19 pandemic has put these airlines into cash crunch as they are unable to generate enough money with ticket sales drying up. The related airlines have resorted to grounding aircraft, and with that they would not be able to earn any ancillary income. 

The situation is now is that one particular airline would have stronger balance sheets than others. But the point is - they are in need of some form of help from the government in order to face the challenging and turbulent environment. As reported, the airlines have taken their own remedial actions to cut costs, by appealing/informing their employees to take unpaid leave, cancelling flights and grounding aircraft.

But it seems that whatever remedial actions taken are not enough for the airlines to stay afloat for the next three to six months since we could not see if there is any sign of the pandemic ending soon.  

IATA has also made the call through its director-general Alexandre de Juniac, urging the Malaysian government to take urgent action to provide support in the form of direct financial support, loans, loan guarantees and support for the corporate bond market and tax relief for the airlines.  

In parallel with what Loke had said and the recommendation made by IATA, again as a logistician who had served in a number of industries in the logistics and supply chain management field, I totally agree and support the idea of government involvement in saving the three major airlines and to listen to the proposed financial support in order to keep the airlines afloat and survive in the current critical environment.

The following assistance and support from the government is fully encouraged and shall be taken immediately without any delay:

1. Financial assistance, in terms of direct financial support, loans (free or low-interest loan), loan guarantees and support for the corporate bond market and tax relief.
2. Financial assistance in terms of tax deferment, defer in payment of bank loans for the airlines and their employees, waive in airport charges and passenger service charges, and defer in EPF contributions to stay afloat.
3. Government support and implementation of a full waiver of the air passenger departure levy, full waiver or up to 50 percent discount of aeronautical (airport, navigation) charges imposed on airlines from the date the first travel restriction and defer, if any, planned increases in aeronautical charges and taxes till year-end.
4. Government support and implementation of full waiver or discount of above 50 percent of the Civil Aviation Authority charges and fees on airlines.
5. Assistance in terms of full exemption of sales and service tax for domestic air tickets and passenger fuel surcharge for the rest of the year.
6. Suspension of “slot rules” shall be maintained until further notice or such time that the economy is fully recovered.

The views expressed here are those of the author/contributor and do not necessarily represent the views of Malaysiakini.

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