Staff at Korean Air have received a memo from their President warning that their country’s flag bearer may well not survive the financial effects of the Covid-19 outbreak. The communication comes as news emerges of a possible complete collapse of the airline industry worldwide.
South Koreans represent the largest proportion of the foreign population of Nanjing. As well as the worry of living with an epidemic in a foreign country, so too they now fear for their national airline.
They are not alone. Reports have emerged today that most of the world’s major airlines could be bankrupt by May. The CAPA Centre for Aviation in Sydney released a statement today warning that many airlines are probably technically bankrupt already.
The UK’s Flybe was Europe’s largest regional airline and the first of the world’s major carriers to go bankrupt. Is Korean Air next? The airline has approximately US$4.3bn of debt that matures this year, according to Moody’s Ratings.
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Last month’s escalation of Covid-19 cases in South Korea caused travel bans or tough entry restrictions to be imposed on people travelling from South Korea to over 100 countries.
As a result, Korean Air slashed more than 80 percent of its international capacity. This compares to an 18 percent cut in same during the financial crisis of 1997-98.
In a memo written to staff, Korean Air’s president, Woo Kee-hong, said, “We can easily imagine the severity of the crisis we are facing in comparison. And what is more daunting is that the situation can get worse at any time, and we cannot even predict how long it will last”, according to Reuters.
A Korean Air spokesman also spoke with the BBC, saying the memo’s purpose was “to encourage employees and ask for understanding in overcoming the crisis together”. He added, “If the situation continues for a longer period, we may reach the threshold where we cannot guarantee the company’s survival”.
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The Asian carrier has to date grounded approximately 70 percent of its 145 passenger aircraft. They include all ten of its Airbus A380s, reports Switzerland-based Ch-aviation.
Efforts at offsetting the ever-increasing debt include the sale of non-core assets and unprofitable business units, deferring investments, cutting operational expenses and encouraging employees to take voluntary leave.
On a global level, aviation consultants believe the coronavirus pandemic will bankrupt most airlines worldwide unless government and industry-led action is taken. If they can avoid falling from the skies altogether, they may find themselves merging in order to survive or having a government has the majority, or even sole, owner.
The International Air Transport Association (IATA) is saying that the global airline industry could be looking at as much as US$113 billion in lost revenues for 2020.
