Menzies Aviation, which employs around 32,000 staff, and provides fueling, ground handling and cargo handling services at 200 airports, announced 27MAR20 that it was cutting around 17,500
jobs globally, as a result of the huge drop in air traffic due to the corona crisis. A drastic cost-reduction move in order to retain the business, since the company currently does not qualify
for government aid.
John Menzies, based in Edinburgh, is stuck between a rock and a hard place. It falls through the gaps of the criteria outlined in UK Government's 'COVID Corporate Financing Facility'. A Menzies spokesman explained that “the group is too big to be classified as a small to medium-sized business, but too small to have the credit rating necessary for the CCFF,” so until these restrictions are adjusted, it cannot currently access emergency credit aimed at helping British companies that had a firm financial foundation prior to 01MAR20, and based on their overall contribution to the UK economy.
Menzies operates in 33 other countries, in addition to the UK, and, already had a difficult 2019 given the sluggish cargo business that year. The corona crisis has now led to a 60% drop in the number of flights being handled in the past two weeks, and a 20% drop in cargo volumes, pushing the company to take unprecedented drastic action, as it looks to stay afloat. Its cost-cutting measures include a 20% pay-cut for all of the company's directors and senior management, and now the 17,500 job reductions across the business. Staff in some of the countries will qualify for government crisis schemes, such as in the UK, where they will receive 80% of their salary in aid.
Giles Wilson, Chief Executive said: “John Menzies plc has existed since 1833 and been listed since 1962 but never have we faced such difficult and unpredictable times. Our industry has been
one of the most affected by COVID-19 and we are doing everything we can to reduce costs whilst looking after the needs of our employees.” News of the workforce being more than halved, let to
a 6% drop in the company’s share price that day.
Menzies is not alone in its plight
According to Air Cargo News, the UK’s four largest handling companies, namely alongside Menzies, Swissport, dnata and WFS, have all warned of the collapse of operations at UK airports now that over 95% of flights are grounded. With no operations, no money is coming in. And so the four have come together to urge the government for support in a joint letter, pointing out that “The ground handling industry is robust and competitive in normal times. We have chosen to come together as one voice in these extraordinary circumstances to ask that we be given the essential and urgent support we need to ensure planes can continue to fly,” and criticizing that “Ground handlers are not represented by the main UK airline or airport operators’ industry associations. We have therefore not been included in any dialogue with the aviation sector held so far,” in what “is quite simply the biggest crisis ever faced by our industry.”
Airports closing temporarily
The crisis comes as many of the world’s airports downsize, adapting to the current freeze in most flight operations. UK’s second largest airport, London Gatwick, announced 27MAR20, that it would be closing its North Terminal for the whole of April and only operate an 8-hour day in the South Terminal during that time. This comes after two other London airports announced changes earlier in the week: London Southend airport will only operate on three afternoons a week, and London City airport has ceased operating completely until May. Manchester Airport is currently operating only one of its three terminals.
Actively attracting crisis business through slot alleviation, free staff parking
London’s largest airport, on the other hand, has actively pushed to attract cargo airlines and logistics providers to keep important supply chains up and running, and has implemented measures such as free staff parking, slot alleviation and incentives. As an airport that handles 41% of country’s pharmaceutical, it is critical for the distribution of medical supplies during the COVID-19 crisis. As Heathrow’s CEO John Holland-Kaye put it: “For the first time in a decade, our airport has additional capacity in its schedule, capacity which we’ve begun to see used to help push vital supplies across the globe to help support frontline teams in the battle against this pandemic. We stand ready to support the country through this crisis. Our intention is to remain open at all times to serve those passenger flights that will continue to operate. And as the UK’s biggest port, we will temporarily increase the number of dedicated cargo flights. These will bring in vital supplies of food and medical equipment to help Britain weather this storm.” A strategy that is bearing fruit as forecasts expect a 53% increase in cargo movements at Heathrow next week as these supplies start moving.
Aviation cannot function without handling services
While Heathrow is a single positive example, the situation at many airports around the world is dramatic, with closures and reductions in many of the 200 countries currently affected by the virus spread. The ground handlers underline that they provide around 90% of cargo and passenger handling, and this requires trained staff: “Without our services and these dedicated teams, the airport infrastructure in the UK would grind to a halt for up to four months and it would take even longer to fully recover once the initial crisis is over. This is something we clearly have a common interest in working together to avoid. Without these services, aviation as a whole cannot function, and supply chains will collapse.”
“Without immediate support with taxation and charges, operational flexibility, and the flow through of the Chancellor’s announcement from last week into actual cash funding to support our workforce, we are perilously close to collapse.”
A plea that will be echoed in a number of other countries around the world, as the uncertainty of the corona crisis pushes most players across the global supply chains to their knees.
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