Domestic airline Villa Air Flyme has announced major pay cuts, with all employees set to receive MVR 2,800 ($180) per month as a flat allowance during the downturn stemming from the coronavirus pandemic.

Villa Air said Wednesday that the company and its sister entities within the Villa Group have no cash reserves, as all profits had been reinvested on business expansion, human resources development, and shielding the businesses from several domestic challenges and shocks.

Loan applications under the government’s relief package for businesses impacted due to the coronavirus pandemic have not yet materialised, it said.

“Taking all of this into consideration, for this period of inactivity, the Board of Directors has decided to equally distribute any remaining funds through all available sources for Villa Air, amongst the remaining staff regardless of rank and file,” a circular sent to employees read.

“As hard as this may be, this is the one and only choice left to the company at this point.”

Villa Air said it will decide by the end of June on the future size of its operations.

“With the current economic outlook, as we recover from this situation, the chances of any tourism related business operating at the same level and size as it was operating before the Covid-19 pandemic is highly unlikely,” the circular read.

“We will endeavour, as much as possible, to inform each individual staff beforehand on how they will be impacted at that point in time. Such measure will inevitably include revision of pay structure and re-sizing of the workforce to match the size of operations.”

Villa Air suspended all of its operations in late March due to the impact of the coronavirus pandemic.

Flyme, part of the Villa Group of Companies owned by local business tycoon Gasim Ibrahim, had its maiden flight on October 1, 2011 between Velana International Airport and Villa Air’s own domestic airport on the island of Maamigili in Alif Dhaal atoll.

Before the pandemic, the airline operated daily flights between Male and Maamigili, and served another nine domestic airports across the archipelago with weekly services. In addition to catering to locals, Flyme also carried tourists to the resorts in Alif Dhaal atoll, including Villa’s own Holiday Island Resort and Sun Island Resort and Spa.

The airline had in November welcomed a brand new 72-seat ATR 72-600 aircraft, expanding its fleet to three.

The coronavirus outbreak has hit the Maldivian economy hard, as travel restrictions and other preventive measures affect the country’s lucrative tourism industry, which contributes the bulk of the island nation’s state revenue and foreign reserves.

Before the pandemic, the government had been bullish about tourism prospects, targeting two million, high-spending holidaymakers this year after last year’s record 1.7 million.

However, tourist arrivals saw a year-over-year decline of 22.8 per cent in the first 10 days of March. Officials say the number of tourist arrivals to the Maldives could drop by half in 2020.

All international airlines have suspended scheduled operations to the Maldives, as the island nation enforced a blanket suspension of on-arrival visa in late March in a bid to combat the spread of the novel coronavirus.

Even before the visa suspension, the Maldives had closed its borders to arrivals from some of the worst-hit countries, including mainland China, Italy, Bangladesh, Iran, Spain, the United Kingdom, Malaysia and Sri Lanka. Visitors from three regions of Germany (Bavaria, North Rhine-Westphalia and Baden-Württemberg), two regions of France (Île-de-France and Grand Est) and two regions of South Korea were also banned from entering the country.

All direct flights to and from China, Italy, South Korea and Iran were also cancelled.

Cruise ships and foreign yachts were also banned from docking at any of the country’s ports.

With arrival numbers falling and the visa suspension in effect, several resorts across the Maldives had been closed.

Tourism has been the bedrock of the Maldives’ economic success. The $5 billion-dollar economy grew by 6.7 per cent in 2018 with tourism generating 60 per cent of foreign income.

However, the government is at present projecting a possible 13 per cent economic contraction this year — an estimated $778 million hit.

The Maldives has announced an MVR 2.5 billion stimulus plan, which includes MVR 1.55 billion ($100 million) in emergency loans for businesses to meet short-term working capital needs.

In addition to the emergency financing, the government’s stimulus plan is complemented by a package of financial measures, including a six-month moratorium on principal and interest repayments for personal, business and housing loans sanctioned by commercial banks.

The government is also subsidising utility bills in March and April.

Those that lose jobs due to the coronavirus pandemic will also be paid unemployment benefit for a period of three months.

Meanwhile, the central bank has announced a $150 million facility for banks to ensure healthy foreign currency reserves.

The facility is arranged through a $400 million stand-by currency swap signed by the Maldives Monetary Authority (MMA) and Reserve Bank of India (RBI) last year, he said.

If required, minimum reserve requirement of banks will also be slashed from 10 to five per cent to allow banks to increase lending.

On March 8, Maldives reported its first cases of the novel coronavirus, as two hotel employees tested positive for Covid-19 at a luxury resort in the archipelago.

Eighteen more cases — all foreigners working or staying resorts and liveaboard vessels except five Maldivians who had returned from abroad — were later identified.

A six-case cluster of locals, detected in capital Male on April 15, confirmed community transmission of the coronavirus. Several more clusters have since been identified, bringing the total number of confirmed case in the Maldives to 618.

Two deaths have been reported and 20 have made full recoveries.

The Maldives announced a state of public health emergency on March 12, the first such declaration under a recent public health protection law.

The public health emergency declaration has allowed the government to introduce a series of unprecedented restrictive and social distancing measures, including stay-at-home orders in capital Male and its suburbs, a ban on inter-island transport and public gatherings across the country, and a nationwide closing of government offices, schools, colleges and universities.

Non-essential services and public places in the capital such as gyms, cinemas and parks have also been shut.

Restaurants and cafes in the capital have been asked to stop dine-in service and switch to takeaway and delivery.

A nationwide shutdown of all guesthouses, city hotels and spa facilities located on inhabited islands is also in effect.