'Emergency Measures + α' Asiana Strengthens Self-Rescue Plan... Major Airlines Also in Critical Condition

Asiana Airlines to Implement Early Unpaid Leave This Month... 33% Uniform Salary Cut for All Employees

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Asiana Airlines has decided to implement unpaid leave early for all employees this month and uniformly cut wages by 33%. This is due to the rapidly worsening business environment as countries around the world are restricting entry of travelers from Korea amid the novel coronavirus disease (COVID-19) outbreak. With the significant reduction in long-haul flights, which are the main source of revenue, not only low-cost carriers (LCCs) but also full-service carriers (FSCs) are being pushed to the brink of collapse.

Asiana Airlines announced on the 2nd that it will implement these strengthened self-help measures starting this month. This means that less than two weeks after announcing a self-help plan on the 18th of last month, which included unpaid leave and partial salary returns by executives, the company has introduced additional strengthening measures.

First, Asiana Airlines has advanced the implementation of unpaid leave of more than 10 days for all employees within this month. Accordingly, all employees’ wages for this month will be uniformly cut by about 33%. Executives will also increase the amount of salary they return. President Han Chang-soo will return his entire salary (previously 40%), and executives will voluntarily return 50% (previously 30%). Each department head will also return 30% of their salary (previously 20%).

These strengthened self-help measures are a response to the rapid spread of COVID-19 centered in Daegu and Gyeongbuk, which led countries worldwide to successively restrict entry of travelers from Korea. According to diplomatic authorities, as of this day, 80 countries have either banned entry of passengers from Korea or strengthened entry procedures such as mandatory self-quarantine.

Asiana Airlines also suspended and reduced flights last week on routes in Europe including Lisbon, Venice, Rome, Barcelona, and Istanbul. When routes are reduced, idle personnel inevitably increase, which directly affects the airline’s cash liquidity. An Asiana Airlines official explained, "As countries block entry of passengers from Korea, there is currently no suitable destination to operate flights," adding, "We adjusted the timing to implement unpaid leave this month instead of the originally planned period from March to May."

As the ripple effects of COVID-19 spread to FSCs, the intensity of the crisis felt by the airline industry is increasing. Korean Air also last week suspended and reduced flights and downsized aircraft on major revenue routes in the Americas (Honolulu, San Francisco, Boston, New York, Chicago, Washington, Dallas) and Europe (Tel Aviv, Milan, Barcelona, Madrid, Vienna, Zagreb, Istanbul). For Korean Air, whose sales from the Americas and Europe accounted for a combined 48% of last year’s revenue, this is a significant blow.

Korean Air has not yet prepared separate self-help measures, but some say it is only a matter of time. The longer the suspension and reduction of flights continue, the more inevitable large-scale losses become. An industry insider said, "Recently, FSCs including Korean Air have been parking large aircraft long-term at aprons," and added, "Once the management dispute at Korean Air is resolved, it is expected that they will seriously consider measures to reduce idle personnel."

This content was produced with the assistance of AI translation services.