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Grounded Eastar cuts its workforce by 20 percent

Eastar Jet is reducing its workforce by 20 percent, the first airline to let go a large number of workers due to the coronavirus.

The budget airline and its union agreed to the layoffs in a meeting Monday morning. A total of 350 workers will lose their jobs. Fewer than 300 will be regular employees.

Eastar, which is currently operating none of its routes, had previously considered letting 750 workers go. It has around 1,600 employees, with 250 of them working as contract employees.

The company has asked labor representatives to negotiate salary reductions so that the employees share in the support of the company and so that workforce reductions can be kept to a minimum, according to a report from Yonhap.

A company executive said that both regular and contract employees will be included in any restructuring.

Eastar Jet is likely to accept applications for voluntary retirement. If the number doesn’t match the company expectation, employees will likely be laid off.

Due to travel restrictions and cancellations, Eastar Jet halted all flights since late March. The airline paid only 40 percent of employee salaries in February.

It paid nothing in March. The company in March also notified some 80 co-pilots with one or two years of experience of contract termination.

“Even if the coronavirus stabilizes in the peak season of the third quarter, delays in school openings and reduced vacation days are likely to affect [the airlines performance],” wrote analyst Yang Ji-hwan from Daishin Securities in a report on Monday.

State-run banks in February pledged to provide 300 billion won ($267.86 million) to low-cost carriers. Already, 126 billion won has been released to five budget airlines: Jeju Air, Jin Air, Air Busan, Air Seoul and T’way Air.

Eastar Jet has been excluded from the financial support, as Jeju Air is set to acquire Eastar Jet.

The deal is being reviewed by the Fair Trade Commission.

Korean Air Lines may put employees on mandatory vacation over the next six months, with staff rotating in to cover essential duties.

A spokesperson for the airline on Monday said the management and labor are discussing the issue, and the agenda is likely to be approved.

BY JIN MIN-JI [jin.minji@joongang.co.kr]