July 21, 2020 12:46
Korea's airline industry continues to suffer from the coronavirus epidemic and no end is in sight.
Air passenger traffic, which averaged at around 10 million a month, has plummeted almost 80 percent, while international travel, which used to account for 90 percent of revenues, stands at just three percent of pre-pandemic levels.
The peak holiday season this year has effectively been a write-off. Earnings have plummeted since the coronavirus epidemic began. Compared to Jan. 1-19, passenger numbers during the first 19 days of this month sank 75 percent, while the number of flights declined 60 percent.
With international flight passenger volume down 97 percent, the average number of passengers on each international flight stands at only 26, meaning planes are flying almost empty.
The only respite so far is a recovery in domestic flight demand, which has returned to around 90 percent of normal times .
This raised the total number of monthly domestic and international passengers from an all-time low of 1.35 million in April to 2.34 million in June, but that is till only 20 percent of the level in the same month of last year.
Airlines have resorted to selling assets and laying off staff to finance billions of won in monthly fixed costs, including aircraft lease payments and wages.
Korean Air said Monday that it shut down its European regional office in Paris, France and Southeast Asian office in Kuala Lumpur, Malaysia recently. The flag carrier also decided to sell off its inflight meal and duty-free businesses to a private equity fund for W1 trillion (US$1=W1,204).
Budget carrier Jeju Air is considering the sale of five surplus aircraft engines and plans to raise W160 billion next month by issuing new stocks. T'way Air also wants to raise W64.3 billion next month by issuing new stocks.
The much-needed streamlining of Korea's budget carrier landscape is facing major obstacles due to the pandemic. Jeju Air's acquisition of Eastar Jet appears to be headed to cancellation. Jeju Air has demanded that Eastar Jet settle its outstanding lease payments and back wages of between W80-100 billion or face a cancellation of the deal, but Eastar Jet failed to do meet the deadline last Wednesday.
Property developer HDC Hyundai Development, which sought to transform itself into a mobility service provider by acquiring Asiana Airlines, recently asked creditors to reconsider the terms of buying the carrier, whose debts have surged by more than W4.5 trillion this year.
Hurr Hee-young at Korea Aerospace University said, "The coronavirus shock that swept through the airline industry will last at least two or three years. It will be hard for the industry to return to pre-pandemic conditions, so a number of carriers will face bankruptcy."
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