LCCs Focused on Whether Employment Retention Subsidy Will Be Extended

T'way Air to End Support at End of August, Accepting Unpaid Leave Conversion Applications from All Employees

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] As the deadline for the government's employment retention subsidy approaches, low-cost carriers (LCCs) are facing increasing concerns. Some airlines have started preparing measures, such as accepting applications for unpaid leave conversion, in case discussions on extending the support fail.

According to the aviation industry on the 28th, T'way Air accepted applications for unpaid leave conversion from all employees until the previous day. The number of employees who applied for unpaid leave is similar to the current 60% of employees on paid leave, and T'way Air is reportedly planning to apply for unpaid leave employment retention subsidies from the authorities soon.

T'way Air accepted unpaid leave conversion applications because the government's employment retention subsidy will end at the end of August. Like other LCCs, T'way Air has been compensating 75% of paid leave allowances through the employment retention subsidy for up to 180 days (6 months) since around March.

The company explained that they proactively chose to switch to unpaid leave employment retention subsidies (50% of basic salary) because the burden would increase if the paid leave employment retention subsidy ended as is. According to current law, to receive unpaid leave employment retention subsidies, an application must be submitted to the Ministry of Employment and Labor one month before the unpaid leave or business suspension. T'way Air stated, "Although discussions on extending the paid leave employment retention subsidy are ongoing, we decided to proceed with the unpaid leave conversion in case the extension fails," adding, "If the paid leave employment retention subsidy is extended, we are considering reapplying for conversion."

Other LCCs such as Jeju Air, Jin Air, Air Busan, and Air Seoul said they will review unpaid leave conversion after observing further discussions on the government's employment retention subsidy extension. Their paid leave employment retention subsidy support periods will also expire sequentially between late August and mid-September. A representative from an LCC said, "We are considering (unpaid leave conversion), but since the payment deadline is until the end of August, there is a sentiment that applying in early or mid-next month would not be too late."

LCCs are putting their fate on whether the paid leave employment retention subsidy will be extended because the industry downturn caused by COVID-19 is gradually becoming prolonged. Although domestic passenger numbers have recovered to about 90% compared to the previous year due to the recent summer vacation season, profitability improvement is difficult to expect due to fares below the published rates and continued international flight restrictions. An industry insider added, "It's not that flights are operated because they are profitable, but rather to supply liquidity."

For this reason, the industry fears that if the employment retention subsidy is not extended, a major employment crisis could erupt across the aviation sector from the end of this year or early next year. On the 22nd, LCC executives visited the National Assembly to request either an extension of the paid leave employment retention subsidy or a relaxation of the conditions for the unpaid leave employment retention subsidy.

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