Airlines brace for major financial turbulence amid the COVID-19 storm

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The Coronavirus pandemic has brought the growing aviation industry in the country reeling to the ground. The plunge in travel and increase in cancellation refunds has soared Bhutan Airlines and Druk Air’s losses to millions.

With flights flying in and out a few times a month ferrying repatriated Bhutanese and cargos, the airline fleet of both Drukair and Bhutan Airlines, are spending more time on the ground than in the air.

Drukair flights reduced from 45 percent in March to 87 percent by June end, running up operational losses to the tune of Nu 1.2B. The airline had generated revenue of over Nu 4B last year.

Speaking to BBS, the Drukair CEO, Tandi Wangchuk, said financially they are down by 84 percent. “This is a very challenging time for Drukair. Somewhere in May, we revised our budget forecast for 2020 from Nu 5.5B revenue to Nu 1.3B. Now we are looking at an operational loss of 1.2B and profit after tax to just over a billion.”

To manage the operational losses, Drukair is planning to take a loan of Nu 1.2B from Financial Institutions for 2020. However, according to the CEO, if the situation continues the airline is considering selling aircraft from its fleet.

“If the business doesn’t pick up, we may look into the possibility of selling one or two aircraft depending on the situation. As things improve, we may look into lease options,” said Tandi Wangchuk.

Drukair currently has four airbuses and one ATR. The company employs around 500 people. Although the company is running into losses, Drukair has not laid off any employees at the moment. However, the company has prepared employees for the worst-case scenario.

“It is very clear that we are looking at 100 employees per aircraft which is a very decent indicator. Going by that indicator, if we sell one aircraft, logically it looks like we need to reduce 100 employees but things in airlines are not simple and straight forward. We have made no decision but I have been sensitizing all my employees that at the end of the day if there is no business, how long can a company keep employing the whole set for 4-5 years without much work.”

The situation is no different for Bhutan Airlines. Although BBS could not get the exact figures, CEO of Bhutan Airlines, Phala Dorji, said the company is running into millions of losses due to the pandemic.

Bhutan Airlines have managed to retain around 200 employees. However, to ease the financial burden, the CEO said the company has reduced employee salaries from June. If the situation gets worse, Bhutan Airlines plans on sending the employees on leave without pay from September.

According to the CEO, the company is requesting leasers to consider some discount on lease rent since both the aircraft are on huge lease rents.

Meanwhile, the government has waived rentals for airport offices and parking fees and extended interest waivers, and loan deferment to the airline sector as well.

While this has provided some financial relief to the airlines, however with the pandemic showing no signs of abating, in the region or globally, for now, the two airlines’ success continues to hinge on how they navigate through this storm with the minimum hits.

 

Sangay Chezom