The Aviation Industry Sinking into the Abyss of Restructuring

"Measures Such as Job Transition Support Programs Must Be Prepared"

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

[Asia Economy Reporter Yoo Je-hoon] As a massive unemployment crisis triggered by Eastar Jet is looming, the aviation industry is sinking into the depths of restructuring. The industry is demanding an extension of employment retention subsidies, but since indefinite support is not sustainable, advice is emerging that the authorities should hasten countermeasures.

According to the aviation industry on the 24th, a total of 24,620 employees from eight domestic airlines (excluding Eastar Jet) have recently entered paid or unpaid leave or furlough, accounting for 65% of the total workforce (37,796 employees). Specifically, there are ▲6,336 unpaid furloughs ▲17,905 paid leave/furloughs ▲379 others including wage reductions.

So far, except for Eastar Jet, large-scale layoffs have not occurred. This is due to the government's employment retention subsidy. Companies eligible for the subsidy receive up to 90% (75% for large corporations) of leave or furlough pay from the government for up to 180 days (6 months). Recently, representatives of low-cost carriers (LCCs) visited the National Assembly to plead for an extension of this support for this reason.

However, with the recent collapse of the merger and acquisition (M&A) between Jeju Air and Eastar Jet, the possibility of mass unemployment has arisen. Eastar Jet is attempting to revive with the support of a third investor, the government, and local governments, but if unsuccessful, about 2,000 people including subcontractors could lose their livelihoods.

This issue is not limited to Eastar Jet alone. Even if the employment retention subsidy is extended, it is inevitably limited, so other airlines are also expected to undergo personnel restructuring in the medium term. Moreover, various international aviation organizations recently forecast that it will take about 2 to 3 years for demand to recover after the COVID-19 pandemic.

In fact, foreign airlines have recently carried out large-scale restructuring due to the downturn caused by COVID-19. In the United States, all three major airlines have joined the restructuring wave. Delta Air Lines recently decided to offer voluntary retirement to 17,000 employees, while American Airlines and United Airlines have each notified 25,000 to 36,000 employees of unpaid furlough plans.

An industry insider said, "The aviation business is inherently volatile, with mass layoffs and hiring repeated depending on the business conditions in the Americas and Europe," adding, "In Korea, where private operators except Korean Air have a short history, there has been no experience of restructuring, bankruptcy, or M&A so far, but it is inevitable that it will materialize someday."

The anxiety among domestic airlines is also growing. Recently, one airline was caught up in rumors of large-scale restructuring at the end of the year. The company stated, "There has been no discussion," but this reflects the anxiety felt by workers in the aviation industry.

Experts advise that authorities should prepare for such situations in the future. They emphasize the need to prepare for the possibility that the aviation industry's downturn caused by COVID-19 may not subside in the short term. Professor Yoon Moon-gil of Korea Aerospace University said, "For special occupational groups such as cabin and flight crew, it may be difficult to find suitable new jobs during restructuring since the entire aviation industry is struggling," adding, "It is necessary to consider support programs for career transition."

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