**Update on 04/19/2020 @ 23:05 UTC – Updated details on Korean Air**
The pressure is piling on the government of South Korea to form a deal that would help bail out Korean airlines. While the government unveiled a financial package on 24th March, the specifics of how the aid would be spent on the aviation industry were lacking. The result is that many Korean carriers are now taking matters into their own hands to conserve cash.
What do Korean airlines need?
Nearly one month ago, on 24th March, the South Korean government announced that it would help finance businesses throughout the coronavirus pandemic. President Moon Jae-in set out a bailout package of KRW 49tn ($4bn) to help the economic fallout. Around $1.6bn of that money is destined for the purchase of corporate bonds that will help companies facing collapse.
Ideally, a portion of this corporate bond package would be used to help Korean airlines survive the crisis. However, there are currently no specific plans that entitle airlines to that money. For this reason, the pressure is mounting on the government to grant loans to save airlines.
The airline industry compromises 3.4% of the country’s GDP, and so it is a vital industry for the nation. Yet, not enough is being done. Korean Air is the largest airline and flag carrier for South Korea; however, it’s not looking to have a prosperous year.
Korean airlines are now taking matters into their own hands
This is a difficult time for Korean airlines. In lieu of any government aid, they have to take matters into their own hands. Asiana Airlines, the second-largest airline in South Korea, is making drastic cuts. It’s asking staff to take 15 days of unpaid leave each month. Effectively, this allows the airline to cut its employee expenditure in half.
Low-cost Korean airline Eastar Jet will cut 20% of its workforce and return nearly 50% of its leased aircraft in the coming weeks. It is in such a financial predicament that it was unable to pay staff in March and ended employment for 80 workers on 1st April who had been with it for less than two years.
“The airline industry is a basic industry that supports [the country]. Considering that Korea relies highly on imports and exports, Korean industries could collapse if the airline industry falls.”
It is now more critical than ever that the government responds to desperate pleas.
Why hasn’t the government acted?
It is thought that the government will discuss an airline package in an Emergency Economic Council Meeting next week. The bailout will hopefully address the dire need from airlines and allow them to protect their staff and operations. This is welcome news. Some say that the government has not acted fast enough.
That said, like many nations around the world, South Korea has a lot on its plate right now. It has, at least, been able to draft a plan for some parts of the economy. What’s left now is to tie the loose ends and come together for the benefit of the airline industry.
Do you think the government has acted too slowly? Do you foresee that a package will save these Korean airlines? Let us know in the comments.