June 30, 2023 13:24
Pilots of Asiana Airlines have been staging a go-slow delaying takeoffs since June 8 in a dispute over wages. They are demanding a 10 percent hike in salaries even though the carrier is broke, but the airline is offering only a 2.5 percent raise.
"We cannot accept a mere 2.5 percent raise after a record operating profit of W733.5 billion last year," the pilots' union said (US$1=W1,318). But management said financial conditions remain tight as Asiana Airlines waits to be taken over by Korean Air.
Airlines around the world are seeing surges in earnings since the end of the coronavirus pandemic. But Asiana Airlines' woes are deepening as Korean Air's takeover attempt is being held up by various governments around the world that have to approve it.
As a result, Asiana Airlines has been unable to hire new workers or buy more aircraft.
Established in 1988, Asiana Airlines became Korea's second airline in an industry that had been monopolized by Korean Air, alleviating a chronic shortage of seats and stirring competition to improve inflight service. But Asiana Airlines began suffering from a cash shortage after 2010, compounded by declining earnings and increased competition from budget carriers. It was put up for sale in 2019.
State-run Korea Development Bank, the main creditor, announced the takeover bid from Korean Air in November 2020. So far, 11 countries have given the merger the green light, but the U.S., EU and Japan have not yet made their final decision and demanded Korean Air alleviate monopoly concerns.
The merger cannot be completed if only one of the three objects.
As the process dragged on, Asiana Airlines has been unable to improve its financial condition. It managed to achieve a record operating profit last year thanks to surging demand for cargo transport, but its debts are sky-high and it paid W170 billion in interest payments alone.
In the first half of this year, operating profit halved on-year to W92.5 billion, while its debt-to-equity ratio soared from 1,780 percent in the previous quarter to 2,013 percent.
Korean Air and budget carriers have been buying new aircraft to deal with soaring travel demand since the pandemic ended, but Asiana Airlines' hands are tied.
Even if the merger is approved, Asiana Airlines could end up relinquishing a large portion of routes and takeoff and landing slots as demanded by the U.S., EU and other countries. The U.K. authorized the merger in March on condition that Asiana Airlines cedes seven slots at London's Heathrow Airport to Virgin Atlantic, while China demanded the carrier hand over nine slots.
Asiana Airlines currently operates 43 flights on five routes to the U.S. and 24 flights on five routes to mainland Europe. If the merger is approved, most of them will go.
If it falls through, Asiana Airlines faces an uncertain fate amid intensifying competition from low-cost carriers and costly long-term leases of aircraft. At present, 51 out of 78 aircraft operated by Asiana Airlines are leased, while Korean Air owns around 70 percent of the 156 aircraft in its stable.
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