[Report] As Sky Routes Block, Korean Air In-flight Meal Center Falls Silent... Aviation Industry Cries Out

Sky Routes Blocked, In-flight Meal Business Also Hit... Partner Companies Undergo Successive Restructuring
Korean Air Launches 'Emergency Management'... "Rapid and Bold Financial Support Essential"

Due to the impact of COVID-19, the in-flight meal preparation area inside Korean Air's catering center was quiet on the 2nd as the airline industry suffers significant losses. Photo by Moon Honam munonam@

[Asia Economy Incheon International Airport=Reporter Yoo Je-hoon] "On October 1, 2017, the daily in-flight meal supply peaked at 89,906 meals, but recently it has dropped to about 3,000 meals per day. This is a level I have never experienced since joining the company. Even those who recently retired said the same."

On the morning of the 2nd, near the cargo terminal of Incheon International Airport in Jung-gu, Incheon, the Korean Air In-flight Meal Center was visited. This in-flight meal center, linked with the Gimpo Airport center, prepares an average of 71,600 meals daily and supplies them to over 30 airlines. Normally, about 1,300 employees, including Korean Air and partner company staff, should be working here at full capacity.

However, the Dish-up Area located on the second floor of the in-flight meal center was filled only with silence. This area is where food produced at Gimpo Airport is plated. Although about 300 workers usually work in three shifts here, only about 30 workers were present that day, working 1.5 shifts. Of approximately 20 production lines, only 3 were operational. Refrigerators scattered around had 'Out of Service' signs attached.

Once called the "golden goose," the Korean Air in-flight meal center has effectively shut down. This is a result of the global air routes being blocked due to the COVID-19 pandemic. Industry insiders agree that since Korean Air, the country's top airline, is facing a liquidity crisis due to a sharp decline in performance, swift and bold financial support from the government is urgently needed.

The Incheon Airport in-flight meal center disclosed by Korean Air on this day is responsible for preparing in-flight meals not only for Korean Air but also for foreign airlines operating at Incheon Airport, in coordination with the Gimpo Airport center. As of last week, the average daily supply of in-flight meals at the Incheon Airport center was 3,700 meals, which is only 5% of the previous average production volume (71,600 meals).

In the airline industry, the in-flight meal business is generally classified as a profitable business with a profit margin of up to 20%. This is a significant difference compared to the passenger transport business, which maintains a profit margin of about 5%. For Korean Air, cash inflows such as in-flight meal sales revenue are gradually shrinking alongside ticket sales revenue. Naturally, restructuring is underway. A Korean Air in-flight meal headquarters official explained, "Currently, about 2,100 people work through six partner companies, but many are already unable to come to work, and restructuring procedures are underway."

As the business environment rapidly deteriorated, Korean Air also began to prepare self-help measures. Recently, it has been negotiating with the general and pilot labor unions on a plan to implement up to six months of rotating paid leave for all employees. In addition, about 390 foreign pilots hired through agencies were mandatorily given three months of unpaid leave.

On the 2nd, as the COVID-19 impact continues to severely affect the airline industry, carts that could not be loaded onto aircraft are piled up in the in-flight meal setting area inside the Korean Air in-flight meal center. Photo by Moon Honam munonam@

However, the industry’s overall assessment is that these self-help measures are insufficient to overcome the crisis. Cash inflows have decreased sharply, drying up funding sources. Korean Air’s debt due this year amounts to about 4.35 trillion won. At the end of this month, about 240 billion won in corporate bonds will mature. Although the urgent fire was put out by issuing 622.8 billion won worth of asset-backed securities (ABS) on the 30th of last month, it is insufficient to repay or refinance the debts due in the second half of the year.

Industry insiders agree that government or policy banks’ payment guarantees are necessary for corporate bonds and ABS issuance by large airlines such as Korean Air. If bond and ABS issuance is blocked in a situation where the business environment does not improve, even Korean Air, the top national airline, will have no means to survive. There are also calls to consider subsidies to prepare for potential future shortages of operating funds. The United States has already decided to provide airlines with subsidies amounting to $32 billion (about 38 trillion won), separate from $29 billion (about 35 trillion won) in payment guarantees. Germany is also considering 'unlimited' financial support measures for national airlines such as Lufthansa.

An official from the business community said, "The biggest problem is that the suspension of flights due to COVID-19 continues, and even Korean Air’s cash flow is drying up," adding, "Without swift and bold financial support like in the US and other countries, the worst situation could be encountered within a few months."

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