Low-cost carrier Jeju Air is poised to receive a government grant to keep the business afloat, according to industry sources, as another budget airline, Eastar Jet, will proceed with further job cuts on Wednesday.
Low-cost carriers along with the entire aviation and travel industry, have been reeling from the impact of the COVID-19 pandemic that has sharply cut travel domestically and internationally.
Jeju Air has applied for the grant known as the key industry stabilization fund, which is worth 40 trillion won ($34.8 billion) and is designed to help industries hit hard by COVID-19, with the evaluation scheduled on Thursday.
“The aviation industry, including our airline, has suffered a major setback and we are currently in the process of applying for the fund in order to overcome the worsening situation,” one official at the airline told The Korea Herald.
If successful, Jeju Air will become the second airline to receive support through the state fund after Asiana Airlines secured 2.4 trillion won following a failed takeover deal with HDC Hyundai Development Company.
Eastar Jet, one of South Korea’s airlines most heavily hit by the pandemic, is laying off 605 employees.
The move, which will see the number of staff slashed down to around 590, comes as the first major staff reduction in the country’s aviation industry, despite the union’s calls on the airline to withdraw the decision and on the government to intervene.
The airline had some 1,680 employees back in March this year when both domestic and international flights came to a halt in the wake of a spike in the number of COVID-19 cases in the country.
Industry sources say a further restructuring of the company down the line could leave the troubled airline with only about 400 staff.
The downsizing comes in line with a reduction in its fleet from 14 to six aircraft, as the current number of staff makes it harder to find a new buyer.
“It is an inevitable decision in order to keep the business afloat and given the promise of rehiring staff (who have been laid off),” one official at Eastar said.
The union, however, has slammed the job cuts and criticized the airline for “failing to pay staff for eight months.“
Jeju Air and Eastar Jet airlines were in talks of acquisition earlier this year before Jeju Air, South Korea’s largest budget airline, pulled the plug on the deal in July, citing uncertainty surrounding Eastar.
Eastar, which has chosen accounting firm Deloitte Korea, corporate law firm Yulchon and Heungkuk Finance Group as its financial advisers, is currently in the process of finding a new buyer.
By Yim Hyun-su (email@example.com