Virus-struck aviation to lose over 11k jobs

The outbreak of coronavirus could result in 11,600 job losses in the aviation industry in Bangladesh, according to an estimate of the International Air Transport Association (IATA).

The pandemic will cause a loss of $69 million or around Tk600 crore from the GDP (Gross Domestic Product) which is supported by the aviation industry, according to the IATA projection. 

IATA on March 23 sent a letter to Prime Minister Sheikh Hasina calling for providing both immediate and medium-to-long term assistance to the airlines and its employees. 

Currently, the aviation industry is supporting 129,000 jobs and IATA was expecting 140,000 more jobs by 2038 amid faster growth of the industry. 

But the coronavirus has caused the industry to stray from its growth curve, raising concern of a 9 percent job loss instead of new job creation, IATA says. 

The job loss is already here in the industry as Regent Airways, a local private airline, grounded its fleet for three months recently amid flight suspension over the coronavirus outbreak forcing Regent to cut its staff by 600. 

Biman Bangladesh Airlines, the country's national carrier, made a 10 percent salary cut of its staff and cancelled overtime and other extra benefits. The cut in salary and other benefits affected its 5,173 employees. 

Prior to the outbreak of coronavirus, Bangladesh's air transport industry's economic contribution was estimated at $769 million or Tk6,500 crore contributing 0.3 percent to the GDP.

In the letter to the prime minister, the IATA said that travel restrictions and other measures adopted by the governments have made most international air services economically unviable or operationally impossible, resulting in a rapid shrinking of the global air transport network. 

IATA estimated that Covid-19 could result in a 9 percent loss in passenger volumes in Bangladesh in 2020. 

Loss in passengers will wipe out $190 million or Tk1,615 crore revenue from airline operators in a single year in 2020. 

Earlier, IATA in a report titled "The Importance of Air Transport to Bangladesh" forecasted that air transport in Bangladesh to grow at 8.4 percent every year until 2038 under the current trends scenario.

In 2018, air passenger flow was 7.2 million which will improve to 19.3 million by 2038.

The rise in air transport will add 6 lakh air passengers annually with a total 12.1 million passenger departures by 2038. 

This increased demand will create around 7,000 jobs every year, according to the report. 

However, the outbreak of coronavirus changed the entire scenario of the aviation industry making the IATA's projection invalid. 

The aviation industry is facing this crisis at a time when the government started a mega investment for the expansion of Hazrat Shahjalal International Airport (HSIA) aiming to improve air transport service to international standard. 

With an investment of Tk21,399 crore, the government will build the much anticipated Terminal-3 which will bring a massive transformation of the existing airport in terms of capacity and security upgradation.

IATA calls for three kinds of government support

The IATA called on the government to plan a comprehensive rescue package including three kinds of urgent measures for economic recovery of the industry.

Direct financial support

IATA advised to provide direct financial support to compensate for reduced revenues and liquidity crisis caused by travel restrictions imposed as a result of COVID-19.

Loans, loan guarantees

Commercial banks may be reluctant to extend credit to airlines in the present situation. In this perspective, the government or the central bank can provide loans, loan guarantees and support for the corporate bond market either directly to the airlines or to commercial banks. The corporate bond market is a vital source of cash, but the eligibility of corporate bonds for central bank support needs to be extended and guaranteed by the government to provide access, according to IATA. 

Tax relief

Rebates on payroll taxes paid to date in 2020 or an extension of payment terms for the rest of 2020, along with a temporary waiver to provide access. 

Financial support is likely to be needed for at least six months, possibly longer, depending on the duration of the outbreak, said the IATA. 

"We are planning to consider airport charges only for local airlines to recover from the current crisis" said Md. Mohibul Haque, senior secretary of the Ministry of Civil Aviation and Tourism.

The ailing aviation industry will affect other export oriented businesses which depend on air transport, said Ashish Rai Choudhury, aviation expert and former chief operating officer of Regent Airways.

He said government support is needed immediately, otherwise more airlines will ground their fleet like Regent. 

The government recently announced a Tk5,000 crore ($588m) incentive for export-oriented industries that would be spent explicitly to pay wages to workers.