State intervention sought in airport ground business
Dar es Salaam. Ground handling service providers are cutting jobs as well as looking into amicable ways of saving on operational costs, what with the plummeting demand for air travel amid the Covid-19 pandemic.
Giant players in the ground handling business at the Julius Nyerere International Airport (JNIA) - Swissport Tanzania and Nas-Dar Airco - are struggling to deal with the slump in air travel.
The Citizen has learnt that at its Dar es Salaam and Kilimanjaro International Airport (Kia) stations, Nas-Dar Airco, has already retrenched 50 workers, making 18 percent of its total workforce.
The company has also suspended the internship programme of about 50 applicants, some of whom were about to be employed.
For its part, Swissport Tanzania, which handles about 25 airlines, said that as part of its cost cutting measures, the only option they had as of now is not to renew the employees’ contracts which are about to end.
However, Swissport chief executive officer Mrisho Yassin said the option in question was not enough to cope with the situation.
As it is, the company was consulting the Association of Tanzania Employers (Ate) on the amicable way of reducing staff costs.
He said if agreed by the union, the company which has 900 employees, would opt for unpaid leave to its workers and or salaries cut for it to continue surviving.
When contacted by The Citizen, Ate executive director Aggrey Mlimuka said his association was of the view that the government should table in Parliament a Bill under the certificate of urgency for amendment of labour laws to cope with the current pandemic.
He also said that to reduce employer’s burden, Ate suggests for suspension of National Social Security Fund (NSSF) payments of 10 percent by employer and the same by employee.
Dr Mlimuka also opined that 4.5 percent in Skills Development Levy (SDL) and one percent in Workers Compensation Fund (WCF) should be suspended for employers who are in distress.
Also in a basket of proposals is slash in corporate tax from 30 to 25 percent, value-added tax (VAT) from 18-to-16 percent and suspending submission of Pay as You Earn (Paye) by employers.
“We need to approach this under certificate of urgency if we are to respond to the Covid-19. If we treat it as ‘business as usual’ we won’t make it,” noted Dr Mlimuka.
While waiting for the government’s response, he urged employers to make consultation with trade unions at place of work and explain to members the real situation and their strategies in coping with the Covid-19.
Before thinking of cutting salary and or giving employees unpaid leave, Ate advised employers to issue paid leave to those who were to go for the same (leave) in a few coming months.
If it doesn’t work, he added, they have to think of reducing allowances and other benefits, if any.
From there, he added, they could start thinking of cutting salaries, before arriving at the intention of sending their employees to unpaid leave. “If it also doesn’t work, they can be forced to declare redundancy or retrenchment. But that should be the last resort after failure of other measures,” suggested Dr Mlimuka.
The Minister of State in the Prime Minister’s Office (Policy, Parliamentary Affairs, Labour, Employment, Youth and the Disabled), Ms Jenista Mhagama, said that the concerns over unpaid leave and salary cut were yet to reach her office.
But, she explained, “The companies should, through Ate, submit their concerns to my ministry and then from there we will be in a position to issue a statement, or else, it can create a panic to the public,” noted Ms Mhagama.
Nas-Dar Airco head of corporate Affairs, Mr Evans Mlelwa, said they were assessing the financial implications of coronavirus outbreak on their 2020 targets.
“But it will not be less than 70 percent drop in revenue as we have since January lost 90 percent of the business due to coronavirus outbreak and low tourism season,” noted Mr Mlelwa. Nas started experiencing a downfall in January due to low tourism season that saw airlines cutting 30 percent of flight turnaround.
He appealed for a stimulus package to boost businesses as coronavirus crisis takes its toll on the economy. “Fiscal measures should be taken using sectoral approach with a view to shielding businesses and employees from layoffs,” noted Mr Mlelwa.
Nas-Dar Airco handles Fly Dubai, KLM, Rwanda Air, Ethiopian Airlines and Precision Air, all, with the exception of Ethiopian Airlines, of which have grounded international flights.
He said once the situation normalises Nas-Dar Airco would call back the internship programme as that is their focus on corporate social responsibility (CSR) in education. “The coronavirus outbreak has disrupted our plans to employ some of the interns,” noted Mr Mlelwa. He said Nas-Dar Airco was working closely with farmers and Kilimanjaro Airports Development Company (Kadco) to revive the exports of fruits and flowers by discussing with cargo flights to come and pick.
Swissport’s Yassin said the company’s ground handling is operating at 10 percent capacity of the budget on the monthly basis.
In the cargo point of view, they were operating at 52 percent capacity of the budget.
“We have 900 staff who can comfortably handle 10,000 flights a year. With the trend, they are now idle and it is the company which is feeling the full force of the crisis,” he said, adding: “We don’t generate revenue anymore to pay them. From this month of April we are paying our staff from our own basically pocket.”
Swissport started feeling the pinch in the last two weeks of March, but the company’s CEO said the period in question seemed to be just the tip of the iceberg.
“This month things have gotten worse before getting better,” said Mr Yassin.
By the end of the April, Swissport will lay off 40,000 of their 65,000 employees globally, according to its CEO Eric Born.
“The aim is to have the people off the payroll for the time being and keep them as employees so that we can have them on board again once we are through with this crisis” Mr Born said in an interview with CNN Money Switzerland. Globally, Swissport is losing up to 80 percent of global revenue due to the novel coronavirus.
“It is almost impossible for us to reduce costs fast enough in order to make our cash flow somehow sustainable,” asserted Mr Born.
The government, meanwhile, insists that the aviation sector is important to the Tanzanian economy, and can draw on an unprecedented range of measures designed to help companies through the crisis.
“As part of cutting costs among ground handlers, we can negotiate on waiving or deferring payment of rents,” the Tanzania Airports Authority (TAA) director general Julius Ndyamukama responded to a plea by Swissport.
The International Air Transport Association (Iata) analysis shows that some 25 million jobs are at risk to be cut as the industry struggles to deal with the major slump in air travel caused by the coronavirus outbreak.
Globally, the livelihoods of some 65.5 million people are dependent on the aviation industry, including sectors such as travel and tourism.
“There are no words to adequately describe the devastating impact of Covid-19 on the airline industry,” Iata’s director general and CEO Alexandre de Juniac said Tuesday in a press release posted on the association’s website.
“And the economic pain will be shared by 25 million people who work in jobs dependent upon airlines. “Airlines must be viable businesses so that they can lead the recovery when the pandemic is contained. A lifeline to the airlines now is critical.
“We have never shuttered the industry on this scale before. Consequently, we have no experience in starting it up. It will be complicated.” Mr De Juniac said there was a need to find a predictable and efficient approach to managing travel restrictions which need to be lifted before they could get back to work. And to be successful, he added, the industry and government might be aligned and working together.
International passenger capacity has in this month so far gone down by 85 percent, according to the International Civil Aviation Organisation. With the situation, it is estimated that the industry will record a 41 to 51 percent drop of seats offered by airlines during the first half of 2020, compared to the earlier plan.
