Last week Star Alliance member and also South Korea’s second largest airline, Asiana, made two clear moves in an effort to stimulate profitability. The first came on Tuesday, as reported by Korea Times, when the airline announced an unpaid leave program for select employees. The second move came Thursday with the announcement of an early retirement offer to employees with more than 15 years of continuous service.

The details

For the unpaid leave offer, employees who take part in the program will be able to take leave anywhere between 15 days and three years. The leave is specifically directed towards office workers. That means pilots, flight attendants and repair crew will not be eligible for this deal.

For it’s offer of early retirement, Asiana has started to receive applications from it’s employees who are working in “administration, sales, or airport services with more than 15 years of employment.”

These employees can submit their applications until the middle of May and if taken, will be asked to leave on June 30th. The severance package will include a one-time payout equivalent to two years of salary. In addition to this they will receive financial support for their children's tuition.

Pulse News reports that the benefits will extend to junior high, high school and university students. Asiana will pay tuition costs in full, regardless of the number of children. Furthermore, the company would also provide external consulting services to help employees find new jobs or start their own business.

The Korea Herald quotes a company official in saying:

"Asiana has decided to conduct the program to induce employees to join self-rescue efforts to pull (the airline) out of the current liquidity crisis."

The bigger picture

This news follows an April 1st announcement that Asiana would reduce it’s fleet and cut routes. We have subsequently learned via The Korea Times that Khabarovsk and Sakhalin in Russia will be cut by September, with Chicago gone by late October.

Following this, a large shareholder of Asiana, Kumho Group, decided in mid-April that it would give up its 33.47% stake in the airline. In exchange, Asiana would receive a rescue package from creditors worth $1.38billion (USD).

Strong regional competition

Asiana finds itself struggling to compete in a difficult and crowded market. It’s main rival is South Korean flag carrier, Korean Air, but that's just the beginning.

To the east are two more high-quality legacy carriers: ANA and Japan Airlines. To the south and west are numerous Chinese giants looking for market share as well, including: Air China, China Eastern, and China Southern. And also to the south are major carriers Cathay Pacific, China Airlines and EVA Air. Not to mention a whole host of low-cost-carriers.

Asiana is not the only large airline to face financial difficulties at this moment. Italian flag carrier Alitalia has recently been trying to find new investors in order to avoid bankruptcy.

Will it work?

Clearly, Asiana faces an uphill battle in maintaining and gaining market share while reducing costs. Do you think this is enough to help turn Asiana around and become profitable? If you were an office worker for Asiana would you take one of these offers?