Malaysia Airlines seeks more cost-cutting to survive crisis

Malaysia Airlines is stepping up efforts to cut costs to survive, following the mysterious disappearance of its flight MH370 which has resulted in the biggest crisis in its 40-year history, a senior executive said on Monday. The Boeing 777-200, carrying 239 passengers and crew, vanished from radar screens on March 8 shortly after taking off from Kuala Lumpur bound for Beijing.

Before the disaster management had hoped to break even in 2014 after three years of losses but last month it posted a record quarterly loss of 443.4 million ringgit ($138 million) for the three months ended March 31. The second quarter this year is “a challenge” but the management wants to implement measures that, if successful, could enable the airline to break even in 2015, Hugh Dunleavy, the carrier's director of commercial operations, told Reuters on the sidelines of the annual meeting of the International Air Transport Association (IATA) in Doha, Qatar.

“I don’t think there will be any sacred cows,” said Dunleavy. “Every part of the airline will have to be looked at very carefully.”

Dunleavy declined to comment on suggestions that MAS could be taken private or that it might sell off its engineering business, but he added that there were other things that the airline could do. These included cutting “legacy costs” that have been in place for “the last 10 to 20 years”, he said.

“The world has changed since those costs were implemented. In those days, the Middle Eastern carriers and low-cost carriers were non-existent. MH370 has given us the impetus to be far more vigorous in going after those costs,” he said.

The airline will retire the last of its older Boeing 737-400 aircraft by 15 June, replacing them with 737-800s that have higher fuel efficiency and lower maintenance costs. The 737-800s are also being worked harder, their average utilization increasing from nine hours a day to around 12 hours, said Dunleavy. Other operating costs are also being tackled, but Dunleavy declined to provide more details as these are being finalised.

Media reports in Malaysia have also suggested that the airline could re-negotiate its catering and ground-handling contracts. Industry sources said that MAS could also cut jobs and freeze wages and bonus payments. The cargo unit's business model is also being re-assessed, with the airline possibly selling some freighters if it can find a buyer. MAS had planned to order new passenger aircraft, including Airbus A330s and A350s, before MH370 went missing. That plan has been put on hold, although the airline could acquire some A330s on lease to replace ageing Boeing 777-200s, the sources said.

The airline could also reconfigure the cabin to add more business class seats to increase revenue yields. Revenues were hit after the MH370 disaster in part because the airline stopped all promotional and marketing activity. This resumed in the first week of May, and forward bookings have returned to pre-MH370 levels in most markets, said Dunleavy. Average fare yields, however, remain under pressure due to competition from other full-service airlines in Asia and the Middle East, as well as low-cost carriers AirAsia and AirAsia X in Malaysia. The airline continues to burn cash but Dunleavy said he remained confident that management can turn the business round.

"We have to look at the business model that will allow us to be sustainable over the next 40 years," he said.

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Exclusive - Airbus may cut more defence jobs in German export row

Germany faces defence industry job cuts beyond those already planned and could even see factories closed or moved abroad if the government insists on toughening restrictions on arms exports, the head of Airbus Group told Reuters. The company's defence and space division already plans to shed some 2,000 industrial jobs in Germany.

"I am concerned about the increasingly restrictive arms export policy of Germany. This might trigger additional layoffs in Germany, beyond our current reduction plans," Chief Executive Tom Enders told Reuters.

"Eventually, we might have to consider closing down entire sites or product lines or moving them outside of Germany.”

The comments, in an exclusive interview at this week's Berlin Airshow, raise the stakes in a growing battle with the German government over the future of the defence industry. Earlier this week, German Economy Minister Sigmar Gabriel vowed a much more cautious approach to licensing arms exports, signalling a change in policy from the previous coalition government under which sales rose. Airbus Group is in the midst of cutting a total of 5,800 jobs, mainly in its Defence and Space division. Enders said it was too early to say how many extra job cuts might be involved since the Berlin government has been in power less than 6 months.

"This is a very recent development," he said. "It just appears that this government is even more restrictive than previous ones, and Germany is already known in Europe and beyond for a very restrictive export policy."

Arms exports have been a sensitive issue in Germany since the end of the Second World War, but have come under even more scrutiny in recent years because of the increased sums and because a greater number of arms are heading to non-European Union or NATO partners, and potentially unstable regions. The Economy Ministry said most of the deals so far this year were approved by Chancellor Angela Merkel's 2009-2013 coalition government with the Free Democrat Liberals (FDP). The ministry is now run by the Social Democrats (SPD) who criticised arms sales whilst in opposition. They formed a coalition with Merkel's conservatives in late 2013.

Earlier this month German media reported Gabriel wanted to block two deals to sell arms to Qatar and Saudi Arabia worth billions of euros. But Enders said deals waiting for approval included "non-lethal sensors" in which Airbus hoped to act as a lower-tier supplier to contractors in another NATO-member country. In 2012, Airbus Group acquired optronics maker Carl Zeiss Optronics, which employs about 780 people.

THREAT TO BUSINESS

The latest standoff is seen by the industry as a test for Germany's ability to compete for future defence deals. However, any move to close or move factories from Germany could also provide the first test of recent Airbus governance changes that give Berlin a veto over some of the country's sensitive technology. Germany owns 11 percent of Airbus Group. Enders, who has clashed in the past with Berlin over defence issues, said the combination of weak spending and the threat to exports could damage small and large businesses alike.

"Our job is not to make politics. If the government wants a very restrictive armament policy we will not be able to prevent them from doing so," Enders said.

"Our job is to show very clearly and up-front what the consequences of that will be. We cannot have a substantial defence industry, and no exports and no (domestic) orders, and believe this is something you could thrive on."

The German defence and space industry employs 105,000 people and reported combined 2013 revenues of 30.6 billion euros (24.7 billion pounds). Airbus Group, Europe's largest aerospace company, employs 144,000 people including about 12,000 in what used to be its Cassidian defence branch in Germany. Enders, a former German defence ministry planner who backs more European integration on foreign and security policy, said the best solution would be a common policy on arms exports.

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Airbus Says No Forced Redundancies In Germany Until End 2016

Airbus has agreed with union representatives to avoid forced redundancies in Germany until the end of 2016, it said on Wednesday.

Airbus is cutting the equivalent of around 5,300 jobs in total as part of a restructuring of its military and space activities, with Germany to bear the brunt of the job cuts.

The agreement, which covers around 2,550 employees in Germany, was communicated to employees on Wednesday morning.

Measures that will be used to avoid compulsory redundancies include early retirement and moving staff internally, the spokesman added.

Airbus is negotiating with works councils in each of the countries that are affected by the cuts including France, Spain and Britain.

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Delta Airlines Cabin Cleaners Protest at LAX

Nearly 100 airport workers who provide cabin-cleaning services for Delta Airlines rallied at LAX on May 6 to protest the hiring of a contractor they say plans to cut worker pay and benefits.

Delta Airlines recently contracted with Gate Gourmet to provide cleaning services for the air carrier.

Tim Maddox, an airport worker and a SEIU member, said he is concerned because Gate Gourmet plans to drop workers’ pay from as high as $14.80 to as low as $8.75 and wants to change to a healthcare plan with higher out-of-pocket costs.

“We already have fought for standards here,” Maddox said at the rally. “The union has allowed us to have decent standards with family healthcare and some vacation time.”

A Delta Airlines spokesman said in a statement that Gate Gourmet has assured the airline it will remain in compliance with all applicable laws and the terms of existing collective bargaining agreements.

“We understand that the SEIU was certified to represent the employees at the prior contractor, but a different union is certified to represent the employees of Gate Gourmet,” Delta spokesman Morgan Durrant said. “Delta is not in a position to influence which union represents the employees of specific contractors.”

Airline workers said during the rally they do not want to go backward at a time when fast food and other service workers are fighting for a $15 per hour minimum wage.

“We want to do the same here at LAX,” Maddox said.

The cabin cleaners are considering holding a strike vote early next week if they feel the dispute is not resolved, according to the union.

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EasyJet to use drones for inspections

British low-cost carrier easyJet said it would be the first airline to use drones to help maintain its fleet to keep a lid on its costs.

The airline said drones - aircraft that do not have a pilot on board - would be used to carry out aircraft checks, cutting down on the time it takes to make inspections, and it would also replace printed charts and log books with electronic ones to cut onboard weight and save on fuel costs.

"We are applying a range of new technologies to the aviation sector for the first time to help us run our fleet of aircraft more effectively, efficiently and safely," the FTSE 100 airline's Chief Executive Carolyn McCall said in a statement on Wednesday.

It said it would start using drones next year after trials in coming months.

Shares in easyJet were trading up 2.2 percent at 1,703 pence at 0842 GMT, after it earlier said the later timing of Easter helped boost its April passenger numbers by 10 percent compared to the year earlier period.

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US airlines have taken some drastic cost cutting measures

AIRLINE passengers in the U.S. might notice something missing these days from their vodka tonics or Diet Cokes ... the lime.

A recent shortage and spike in price has caused some airlines — for now — to stop offering the fruit in their beverage service.

“We temporarily pulled limes about two weeks ago, due to skyrocketing lime prices,” says Alaska Airlines spokeswoman Halley Knigge. She says the airline normally goes through about 900 limes a day.

Lime growers in the Mexican state of Michoacan have reduced their supply because of unrest caused by drug cartels and flooding from heavy rains. That, combined with drought in California and an overall growing demand for limes for margaritas, tacos and other dishes, has driven up prices to a three-year high.

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