Note to Editors 19 June 2003
SIA GROUP TO
RETRENCH 414 STAFF
The Singapore Airlines (SIA) Group today announced that it will retrench 414 Singapore-based employees, comprising office staff, airport workers and engineering personnel.
The 414 staff represent 1.5 per cent of the SIA Group’s staff strength in Singapore. A breakdown of the number of retrenched staff by company is attached.
SIA has initiated the retrenchment exercise as a last step in response to the current operating environment, following earlier moves to stringently manage costs. These moves included deferring discretionary spending, freezing recruitment, asking management to accept wage cuts of up to 27.5 per cent, and introducing compulsory no-pay leave for cabin crew. At the same time, SIA has cut its passenger capacity by over 30 per cent since 1 April 2003.
“We have always said that we would consider retrenchment as a measure of last resort. I am sad to say that we are now at that point,” said Mr Chew Choon Seng, CEO, Singapore Airlines. “It is unfortunate, but there is no alternative if we are to ensure that the Company survives this downturn and position ourselves to compete effectively in the marketplace of the future.”
Affected staff with at least three years’ service will receive one month’s salary for every completed year of service, subject to a maximum of 25 months’ pay. Staff with less than three years’ service will not receive such payment; however, they will be entitled to all other parts of the severance package.
Note to Editors - 2 - 19 June 2003
The severance package comprises:
a profit-sharing bonus of 3.23 months
a prorated annual wage supplement
payment in lieu of notice and unconsumed leave
the extension of medical and travel benefits until the end of 2003
SIA has offered counselling services and re-employment workshops to assist affected employees cope with the transition. Details of the available programmes are attached.
SIA will continue to make appropriate adjustments to its cost structures as necessary.
SIA Group Retrenchment Exercise
RETRENCHED STAFF BY
Singapore Airlines Cargo
SIA Engineering Co
SIA Group Retrenchment Exercise
CEO – MR
CHEW CHOON SENG
I am afraid that the news I have today is not good.
As you know, this year for the month of April the airline operations of SIA suffered a loss of $204 million. In May, we had trimmed capacity to 40 per cent below the same month last year. But passenger kilometers fell by a larger amount and was down 56 per cent. As a result, the passenger load factor fell to only 53 per cent.
There were savings in variable costs, which are directly related to scale of operations, as a result of the cutback in the flight schedules. However, our fixed costs, principally aircraft standing costs and staff costs, remained at the same level as a year ago. Given the smaller operating base in May, our unit cost went up a whopping 26 per cent. At the same time, market conditions depressed unit yield by 2 per cent. The breakeven passenger load factor shot up to 92 per cent.
The big gap between the achieved load factor and that needed to breakeven meant that we incurred an operating loss of $166 million in May. This is less than the loss in April, partly because of lower fuel prices in May.
So, for just the two months of April and May we have suffered a loss of $370 million from airline operations. That works out to a loss of over $6 million per day.
Unfortunately although the drop in business has bottomed out, demand is running at a much lower level than pre-SARS and a year on year recovery is not in sight. Our marketing promotions to rebuild confidence and to rekindle interest in travel to and through Singapore are producing some results but at the expense of lower revenue yields.
It is clear that we have to cure this financial hemorrhage. We cannot simply wait, do nothing and just hope that business will recover sooner rather than later. We need to act now to save the Company.
We have implemented all the obvious measures to save on costs where we can, such as cutting discretionary spending, cancelling non-essential projects and deferring capital expenditures, without compromising safety and security. Recruitment has been suspended and supply arrangements have been re-negotiated.
We now have no choice but to turn to our wage costs for savings. Our cabin crew colleagues must be commended for proceeding to take no-pay leave. Management staff has taken pay cuts of up to 27.5 per cent and Board members have resolved to waive 50 per cent of their fees. And discussions between the Company and the staff unions on the subject of pay cuts are ongoing. But regrettably that will not be sufficient.
We have always said that we would only consider retrenchment as a measure of last resort. I am very sad to say that we are now at that point.
Today, we have to inform 129 of our colleagues in the airline that their jobs are gone and their employment will end. There are another 285 colleagues in the rest of the Group who will be in the same predicament.
This is very traumatic for all of us, and we have taken steps to ease the pain for those being retrenched. The staff affected will be spoken to by their managers. Professional counselling will be made available. The Company will assist with job search and job placement services. In addition to retrenchment payment at the rate of one month’s pay for each year of service, each staff affected will receive pay in lieu of notice of termination of employment plus their full entitlement to bonus payable in the current year and pro-ration of the AWS. Medical and privilege travel benefits will be extended to the end of this year.
Let us help each other to get through this difficult day. We encourage colleagues to lend a hand and a shoulder to lean on, as may be appropriate.
I am sorry that this has to happen, but there is no alternative if we are to ensure that the Company survives this downturn, and if we are to be well positioned to compete effectively in the market place of the future, against other airlines which have changed, or are changing, their cost structures radically.
Thank you for your attention.
Chew Choon Seng