Hard times for airlines. Malev collapses. American Airlines lays of 13,000 staff and Air India cannot pay for fuel
Hungarian airline, Malev, has folded, after 66 years. The EC had asked it to repay the €130 m it had received in state aid from 2007 to 2010. This comes soon after the collapse of Spanair. Malev is part of the Oneworld airline alliance, which also includes American Airlines and BA. Also American Airlines has announced it will cut 13,000 jobs, maintenance staff, flight attendants, pilots and management – about 15% of its staff. It wants to cut staff costs by 20% in a bid to reduce spending by $2bn per year. And Air India has got behind in its payments for jet fuel to three state-owned oil and its fuel supplies were cut. The fuel suppliers say Air India has not paid them for fuel even after the expiry of a 90-day grace period.
3 February 2012 (BBC)
Hungarian airline Malev collapses
The Hungarian national airline Malev has folded after its financial situation became unsustainable.
“At 0500 GMT… after 66 years of almost continuous operation Malev will no longer take off,” it said.
It came after the European Commission ordered Malev to repay various forms of state aid received from 2007 to 2010.
The sums involved amounted to 38 billion forints (130m euros; $171m; £108m), a sum equal to its entire 2010 revenue.
“Despite its best interests the owner can no longer provide financial resources for the operation of the airline in the wake of the condemning decision of the European Commission,” an airline statement said.
The European Consumer Organisation, which “defends the interests of all Europe’s consumers”, said the news came after Spanair’s collapse in the very same week.
“This development is yet more incontrovertible proof that the current update of European legislation on air travel must incorporate a mandatory guarantee against airline bankruptcies,” it said.
‘Inherited skeletons’
The carrier employs 2,600 people and is responsible for close to half of all air traffic at Budapest Liszt Ferenc airport.
Part of the Oneworld airline alliance, which also includes American Airlines and British Airways, Malev has a leased fleet of 22 passenger aircraft.
In 2010 it posted a loss of 24.6bn forints, although an improved 2011 figure had been predicted.
Chief executive Lorant Limburger said the immediate reason for the collapse was the demand for upfront payments by its suppliers.
Prime Minister Viktor Orban said on state radio that two Malev planes were still overseas, one in Tel Aviv, the other in the Irish Republic.
The premier said those planes were not allowed to take off because of Malev’s debts.
He told radio station MR1-Kossuth that Malev may possibly be relaunched “if we manage to get rid of the inherited skeletons”.
On Thursday, Hungary’s government appointed a receiver to the airline to try to protect it from creditors’ claims.
Hungarian newswire MTI had said that 64 Malev flights were scheduled to fly from Budapest on Friday.
http://www.bbc.co.uk/news/business-16866872
1 February 2012 (BBC)
American Airlines announces 13,000 job cuts
The parent company of American Airlines (AA) says it will shed 13,000 jobs – around 15% of its workforce.
AA’s parent, AMR, wants to cut staff costs by 20% in a bid to reduce spending by $2bn (£1.26, 1.52bn euros) and raise revenue by $1bn a year.
AMR, which filed for bankruptcy protection in November, also wants to make changes to its staff pensions.
The 88,000 strong workforce is mostly represented by three main unions, which are opposed to the changes.
AMR said it plans to begin negotiations with the three unions shortly.
AMR lost $884m in the first nine months of 2011, and on Tuesday disclosed a $904m loss for December alone.
The company has lost more than $11bn since 2001.
AMR’s chief executive, Thomas W Horton said in a letter to employees: “We are going to use the restructuring process to make the necessary changes to meet our challenges head-on and capitalise fully on the solid foundation we’ve put in place.”
‘Dismay and outrage’
Mr Horton said in December that the company would emerge from bankruptcy with fewer workers.
“I expect dismay and outrage from our membership as details of the proposal are made public,” said Laura Glading, president of the flight attendants’ union.
Mr Horton said the planned cost-cutting moves will include restructuring debt and aircraft leases, grounding older planes, and changing workforce contracts, some management jobs will also go as part of the plans.
The biggest cuts – about 4,600 – are expected to be among maintenance workers. Baggage handlers could be cut by 4,200, while some 2,300 flight attendants, 1,400 management employees and 400 pilots would also lose their jobs.
The company also wants union approval to drop its traditional pension plans, which pay a defined amount of pension and covers 130,000 employees and retirees, and replace them with a “retirement account”.
AMR’s company pension funds are underfunded by billions of dollars and the company said on its website on Wednesday that it could no longer afford them.
AMR is the latest of several large US airlines to go through Chapter 11 bankruptcy protection in an effort to reduce costs and debt.
http://www.bbc.co.uk/news/business-16847278
3 February 2012 (BBC)
Air India asked to pay fuel bill as firms cut supplies
Air India has assured that it will pay its dues for jet fuel to three state-owned oil firms by Friday after its fuel supplies were cut.
Indian oil, Bharat Petroleum and Hindustan Petroleum halted supplies to the airline for almost four hours on Thursday evening.
They alleged that Air India has not paid them for fuel even after the expiry of a 90-day grace period.
The carrier owes 2.6bn rupees ($53m; £34m) for the said period to the firms.
The airline said it had made some payments over the last two days and will pay another 400m rupees by Friday.
Growing concerns
The national carrier has seen its fortunes dwindle in recent years despite merging with Indian Airlines in 2007.
The firm has been making heavy losses and its debt burden has been increasing raising concerns about the long term viability and future of the airline.
It owes a total of more than 40bn rupees in unpaid fuel bills to public sector oil companies in India.
Last year oil firms had put the airline on a cash-and-carry deal, which meant that Air India had to pay every time it refuelled its planes, rather than get a 90-day grace period usually given to make payments.
The firms had restored the credit limit on assurances from the government that payments will be made in time.
After the latest halt on Thursday, Nasim Zaidi, India’s civil aviation secretary, said he had requested the firms not to halt supplies.
“I have spoken to the petroleum secretary not to disrupt supplies and he has assured me [that they will not be cut].”