"When Fallen Leaves Drop, Will Aviation Employment Face a Great Chaos?" The Trembling Gonghang-dong

"If Employment Retention Subsidies Are Cut, Workforce Restructuring Is the Only Cost-Cutting Measure"

On the 18th, the departure hall of Terminal 1 at Incheon International Airport was deserted due to the impact of the novel coronavirus disease (COVID-19), as the aviation industry, hit hard by COVID-19, faces a wave of layoffs. Photo by Mun Honam munonam@

[Asia Economy Reporter Yoo Je-hoon] As the unprecedented situation of the novel coronavirus infection (COVID-19) prolongs, airport areas densely populated with the aviation industry are suffering from employment instability. Inside and outside the industry, there are concerned forecasts that workforce restructuring at each airline may become visible around this fall when the government's employment retention subsidy ends.

According to the aviation industry on the 21st, the employment retention subsidy payment period (180 days) applied for by each national airline will expire sequentially from the end of next month. Low-cost carriers (LCCs) that applied in March will see their subsidies end by the end of next month, and Korean Air, which applied in April, will see theirs expire by mid-October.

Earlier, the government designated the aviation industry, which was driven to the brink of collapse after the COVID-19 pandemic, as a "special employment support industry," and has been operating an employment retention subsidy system that compensates 90% of leave allowances for 180 days on the premise of maintaining employment.

The problem is that despite the payment deadline approaching, there are no signs of improvement in business conditions. Although international flights have resumed in some countries such as China, operations are under extremely limited conditions, making it difficult to expect profitability improvement. According to the Ministry of Land, Infrastructure and Transport's Aviation Information Portal System, the number of international passengers at all domestic airports in June was 183,349, a 97% decrease compared to the previous year.

As this situation continues, airlines have also started tightening their belts. Korean Air, the industry leader, recently began slimming down its organization by closing its Europe and Southeast Asia regional headquarters. Additionally, it is currently negotiating with authorities on converting passenger aircraft into cargo planes by removing seats. Jeju Air is also reportedly considering selling some aircraft engines. Asset sales and capital increases to inject funds are actively underway.

However, since it is expected to take at least 2 to 3 years for aviation demand to recover, these self-help measures are generally considered insufficient. In fact, the International Air Transport Association (IATA) previously forecasted that air travel demand would not recover to 2019 levels even by 2023.

Therefore, concerns are growing that an employment crisis will spread throughout the aviation industry after the employment retention subsidy ends this fall. The aviation industry is negotiating with authorities to extend the subsidy, considering this, but the situation is reportedly difficult. Professor Lee Hwi-young of Inha Technical College said, "Typically, labor costs are the second largest expense for airlines after fuel costs. If the employment retention subsidy ends, airlines will have no choice but to squeeze labor costs, naturally leading to workforce restructuring."

Experts agree that if the employment retention subsidy support ends, LCCs are likely to undergo restructuring within this year, and major airlines by next year, emphasizing the need for selective government support. Professor Hwang Yong-sik of Sejong University stated, "About 800,000 people are directly or indirectly related to the aviation industry, and if they lose their jobs, it is true that reemployment is not easy due to the nature of the industry. The government needs to take extraordinary measures and provide selective support to industries directly affected by COVID-19, such as air transportation."

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