Airlines are fighting for survival

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Airlines are fighting for survival

Asiana Airlines is taking “desperate measures” as its business is gutted by the coronavirus outbreak and the company faces the possibility of dramatic losses.

Top executives at the carrier are taking up to 30 or 40 percent pay cuts, others are taking smaller cuts and employees are being forced to take unpaid leave.

China accounted for 20 percent of the carrier’s routes before the outbreak started to take its toll on traffic. The airline has reduced available seats to China by 79 percent and to Southeast Asia by 25 percent.

Asiana started putting its contingency plan into effect on Tuesday.

“Our company is on the verge recording a massive operating loss due to the coronavirus,” said Asiana Airlines CEO Han Chang-soo in a statement sent to staff on Tuesday.

“The time calls for desperate measures and execution across every division.”

As a part of the cost-cutting measures, executives will take cuts varying by their position within the organizational chart. The presidents will take a 40 percent reduction, top executives 30 percent and division heads 20 percent. Asiana will make all employees take 10 days of unpaid leave.

Asiana’s top executives, including CEO Han, have submitted their resignations.

The action doesn’t necessarily mean there are all resigning but is more like a symbolic action in Korea’s culture to show that they’re taking all necessary measures.

“Our direction in the meanwhile will be to minimize working staff as much as possible,” the company said in a statement. “Apart from sales, activities that are not directly related to profitability will be greatly reduced.”

On Monday, Asiana’s three labor unions and management huddled and promised close cooperation until the crisis is over.

Asiana has among the highest dependence on China routes. But it’s not the only carrier pushed to the brink by the outbreak.

The situation is even worse for low-cost carriers, which have a higher proportion of regional shorter hauls.

Jeju Air went into crisis mode last week. Top management took a 30 percent wage cut, and all employees were made to take unpaid leave. The company started receiving requests for unpaid leave from its cabin crew last month.

In an email sent to Jeju Air staff, CEO Lee Seok-joo said the industry had passed the stage of “worrying about low profitability”; it was now a matter of “survival.”

Even before the coronavirus outbreak, domestic carriers were fighting a drop in demand as a result of various global issues, including the U.S.-China trade conflict, the Korea-Japan conflict and Hong Kong protests. Cargo businesses of the carriers were hit by the slowing of the global economy.

Low-cost carriers were also battling aggressive pricing and overcapacity.

The government announced Monday support for low-cost carriers, including maximum 300 billion won ($252 million) in loans. All airlines that experienced a drop in the number of passengers will have their airport facility charges suspended by three months.

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