Eastar Air Terminates Contract with Ground Handling Subsidiary Eastarport
by Yoo Jaehoon
Published 10 Apr.2020 11:02(KST)
On the 24th, Eastar Jet decided to suspend all domestic flights following the suspension of international flights due to the spread of COVID-19. It is the first shutdown among South Korean airlines. On the same day, the Eastar Jet ticket counter at the domestic terminal of Gimpo Airport in Gangseo-gu, Seoul, was quiet. Photo by Moon Honam munonam@
View original image[Asia Economy Reporter Yu Je-hoon] It has been confirmed that Eastar Jet has terminated its ground handling contract with its ground handling subsidiary, Eastar Port. This has forced Eastar Port into a 'work shutdown.' According to the aviation industry on the 10th, Eastar Jet notified Eastar Port of the contract termination on the 7th. Established in 2015, Eastar Port is a ground handling subsidiary wholly owned (100% stake) by Eastar Jet.
Eastar Port has been performing various tasks at each airport, including ticket verification, seat assignment, checked baggage handling, aircraft boarding management, and aircraft maintenance for Eastar Jet. With Eastar Jet terminating the contract, Eastar Port and its approximately 200 employees have effectively been left without work.
The reason cited for Eastar Jet's contract termination is financial difficulties. Due to the COVID-19 pandemic causing a sharp decline in passenger demand and cutting off cash inflows, Eastar Jet was unable to pay employee salaries in February and March, and this month decided to lay off about 300 employees, approximately 20% of its workforce.
Since the suspension of all flight routes from the 24th of last month, related ground handling operations have virtually disappeared. Industry insiders note that since Jeju Air, the company acquiring Eastar Jet, also has a ground handling company, JAS (Jeju Air Service), as a subsidiary, this move was anticipated. An Eastar Jet official stated, "It is an unfortunate but unavoidable decision due to the parent company's difficulties," adding, "We will proceed with the necessary procedures following the contract termination."
The crisis in the aviation industry is rapidly spreading from airlines to ground handling companies, in-flight meal manufacturers, and partner companies. Like the parent airlines, unpaid leave and layoffs have become common among ground handling companies and partners. Accordingly, ground handling companies are demanding active government measures. Specifically, they request exemptions from airport concession fees, various facility usage fees, office rental fees, and land usage fees.
An industry insider said, "Although the government announced a measure the day before to fully waive apron usage fees for three months, the actual amount waived is around 1 billion KRW, so the effect will be minimal," adding, "Each company urgently needs more substantial support to avoid the worst-case scenario."