Value context and insight. lkm@koreatimes.co.kr
Gov't urged to bail out virus-hit airline industry
Aircrafts line up at Incheon International Airport, April 14. Yonhap
By Lee Kyung-min
By Lee Kyung-min
Calls are growing for the government to bail out airline businesses among many other key industries that had their credit ratings downgraded due to rapid deterioration of corporate bottom lines amid the COVID-19 pandemic, Sunday.
The government backing about 20 trillion won ($1.6 billion) in corporate bonds issued by many otherwise robust firms would be a major lifeline for them to borrow money for stable operation.
The industries underpinning the economy include equipment, energy, shipbuilding and marine, car manufacturing and electronics including semiconductor manufacturing.
The airline sector creates nearly 840,000 jobs, accounting for 3.4 percent of the country's GDP.
The idea long floated by industry figures has picked up steam as airline businesses approach what seems to be a very imminent fear of insolvency, following an 80 percent plunge in monthly sales in the months following the original outbreak compared to before.
Korean Air, the country's largest air carrier, is “hanging by a thread” with its cash reserve running dry fast, straining its contractors including aircraft fuel sellers and in-flight meal makers.
As of 2019, the carrier had 816.2 billion won in cash holdings. But the reserve is close to being depleted as it has to pay 240 billion won in corporate bonds set to mature April. Also to be spent is up to 500 billion won in monthly fixed expenditures including aircraft leasing fees and workers' salaries.
While it managed to issue 622 billion won in asset-backed securities (ABS) in March, it narrowly pushed back the coming debt payment deadline.
The carrier paid off debts of 570 billion as of March, which is only a fraction of the 4.3 trillion to be paid by the end of the year.
In dire straits are low-cost carriers such as Eastar Jet, which plans to lay off 20 percent of its 1,680 workers, saying this is less harsh than the original plan under which up to 45 percent of the workforce would be culled.
The firm also said it already returned two out of 23 planes to leasing companies, adding that eight more will be returned soon.
The company on March 30 notified its 80 new workers with less than two years of experience that their employment will be terminated as of April 1.
The firm paid workers only 40 percent of their usual salary in February and none in March.
The situation is similar with subcontractors of Korean Air and Asiana Airlines, the country's second-largest carrier.
Of over 1,800 workers at companies making in-flight meals for Korean Air, more than half or 1,000 were laid off. Of the remaining 800, nearly half are on unpaid leave.
Another in-flight meal maker contracted with Asiana announced that its workers will be placed on indefinite unpaid leave starting May.
No immediate turnaround is expected given the number of travelers has nosedived over the past few months.
According to Incheon International Airport Corp. (IIAC), only 3,424 people landed or departed via the airport April 13, the lowest since the airport opened for service in March 2001. The figure is a 98 percent drop from the yearly average of 200,000.
President Moon Jae-in is likely to discuss the plan as early as this week at an Emergency Economic Council Meeting.