Korea’s airlines could lose $5.8 billion in six months: ICAO

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Korea’s airlines could lose $5.8 billion in six months: ICAO

Korea’s airline industry could lose up to $5.8 billion in the first half of the year as a result of the coronavirus pandemic, according to a UN agency.

The International Civil Aviation Organization (ICAO), a specialized agency under the United Nations, predicted earlier this month that airlines around the world will lose between $90 billion and $118 billion in gross operating revenue in the first half.

The number of passengers will shrink up to 535 million, it said, while the number of seats offered by airlines will fall by up to 48 percent.

In its analysis, the ICAO said Korea could lose up to $5.8 billion in revenue while its number of passengers could fall by up to 28 million from an original expectation of 45.94 million passengers from January to June. The report said Korean airlines will have to reduce their capacity by as much as 55 percent.

The ICAO predicts that the global airline industry could make a “V-shaped” or “U-shaped” recovery depending on how long the pandemic lasts. The V-shaped recovery scenario is based on a recovery in May, and the U-shaped scenario on a recovery in July.

In the V-shaped path, the ICAO said the number of seats offered by airlines will fall by 37 percent in the first half of this year compared to the same period a year earlier. The scenario posits that the number of passengers will fall by 411 million while airlines suffer $90 billion in lost revenue.

Within that scenario, Korea would lose 46 percent of its seats, 23 million passengers and $4.7 billion in revenues.

In the U-shaped path, the ICAO predicts that global airlines will accumulate $118 billion in lost revenue, lose 535 million passengers and 48 percent of seat capacity. Korea would lose 28 million passengers, $5.8 billion in revenue and offer 55 percent fewer seats.

“Given a rapidly-changing environment, Scenarios 1 and 2 are merely indicative of two possible paths out of many,” the report said.

“The exact path will depend upon various factors, inter alia, duration and magnitude of the outbreak and containment measures, availability of government assistance, consumers’ confidence and economic conditions.”

Korea’s two major airlines, Korean Air and Asiana Airlines, which already suffered a bad 2019, both recorded losses. HDC Hyundai Development and Mirae Asset Daewoo are planning to acquire Asiana after signing a deal in December to purchase a 31.05 percent stake in the airline for around 2.4 trillion won ($2 billion).

The woes are even worse among low-cost carriers, many of whom are facing insolvency.

Industry unions have been calling for increased financial support for airlines and related companies to survive the coronavirus pandemic.

The Korean Air Pilot Union and the Federation of Korean United Worker’s Unions demanded in a press conference Tuesday the government give increased support for around 250,000 workers in the airline industry and related sectors.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]

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