Eastar Jet is asking its cabin crew to take up to four weeks of unpaid leave to help Eastar deal with severe financial challenges. Reuters is reporting on an internal memo from CEO Choi Jong-gu, which makes the leave request and says the airline is facing its “biggest crisis”. Since the memo came to public attention, it has been withdrawn from circulation.
Eastar Jet, which first started flying in 2009, is based at Gimpo International Airport. It flies to 14 destinations in eight countries, carrying nearly six million passengers last year. Eastar has a fleet of 23 Boeing 737s, including two grounded 737 MAX 8s. Of the remaining fleet, there are 19 Boeing 737-800s and two Boeing 737-900ERs.
What’s behind Eastar’s current financial woes?
Kim Hyun-bin wrote in The Korea Times this week that the “Boycott Japan” campaign and the MAX grounding have been big contributors to the airline’s financial woes. The impact of the 737 MAX grounding on airlines around the world has been well reported. In Easter Jet’s case, the grounding has forced it to delay initiating some new routes.
The “Boycott Japan” campaign is a South Korean phenomenon and allegedly has its roots in a trade dispute between Japan and South Korea. It relates to a restriction by Japan on the export of three key chemicals used by big South Korean manufacturers like Samsung.
But South Korean antipathy towards Japan has its modern origins in WWII when the Japanese Imperial Army behaved appallingly towards South Korea. The chemical restrictions are seen as an excuse to activate long-held anti-Japanese sentiment.
And the Boycott Japan campaign has been a big success – as long as you are not a Japanese business trying to sell in South Korea. Toyota sales are down 30% this year in South Korea and Japanese beer is going warm on supermarket shelves.
Eastar Jet flies to nine destinations across Japan and, in light of the Boycott Japan campaign, many South Koreans are deferring non-essential travel to Japan. According to the report in The Korea Times, Japan-bound passengers passing through Incheon are down 29% over the previous year.
Eastar Jet is suspending flights to three Japanese destinations – Okinawa, Sapporo and Kagoshima – over the northern 2019/20 winter in response to the downturn.
Between the two grounded MAXs and the Boycott Japan campaign affecting flights to Japan, Eastar Jet has found itself with too many cabin crew. According to an unnamed Eastar spokesman in the report;
“There has been a surplus in flight attendants as the Boycott Japan movement and the grounding of the two Max 8 planes have been prolonged … Employees who go on leave will not face disadvantages.”
Up to 500 cabin crew will be required to take the unpaid leave throughout the remainder of 2019.
Eastar has long had financial challenges
Despite growing routes and passenger numbers, Eastar Jet has faced financial challenges since its inception ten years ago. In 2012, its viability was is doubt and it was said to be in a state of “total capital impairment.” The reason given was that Eastar Jet’s parent company, KIC Group, had a weak capital base.
Last year AIN Online released a report suggesting the number of low-cost carriers in South Korea was unsustainable, Supply was exceeding demand, the competition was driving down prices and eroding profits
And now Eastar Jet says its present problems are its “biggest crisis.” Certainly, with cabin crew forced to take unpaid leave, the pain is moving down from the boardroom to the shop floor.
Simple Flying reached out to Eastar Jet regarding their unpaid leave plan but had not received a response prior to publication.