Report by : Gan Yung Chyan
/ KUCINTA SETIA
Recently, China Business News reporter learned from the Head of Air Busan that due to the impact of reduced travel demand that may be caused by the COVID-19 (covid, in short) epidemic in South Korea, the airline decided to take into account the attitude of the person in charge of investors. All executives, including the CEO and the general manager, will submit their resignations and return 30 per cent of their annual salaries to help the company overcome difficulties.
According to the above information, the company's executives will be divided into required personnel and non-essential personnel. Non-essential personnel will leave the airline immediately after submitting resignations, while required personnel will leave the company after the epidemic is over.
In addition, Air Busan will deduct 10 per cent of salaries for middle-level cadres, and will implement rotating unpaid vacations for all grass-roots employees, and ground all flights to 25 China, Hong Kong, Macau, Taiwan and Southeast Asia airports, as well as all flights with Daegu as the destination or departure point that will account for nearly 70 per cent of Air Busan's total flights.
Air Busan is a low-cost airline and the joint venture between South Korea ’s second largest airline Asiana Airlines and the Busan City Government. Based on the 2018 annual report, it is the only low-cost airline that generated net profit of 20.6 billion Won. However, although the company's 2019 annual report has not yet been released, the analysis given by the top ten brokers in South Korea on Air Busan's financial performance is all a loss. If the forecast is confirmed, Air Busan will also usher in the first loss in 10 years.
Air Busan currently operates flights to 33 cities including 13 cities in China, Hong Kong, Macau and Taiwan. After the emergence of covid in China, the airline has reduced some flights to these destinations.
The person in charge of Air Busan verified the above information with the First Financial Reporter and revealed that due to restrictions on route allocation and aircraft types, its low-cost flights are mainly concentrated in China, Japan and Southeast Asia and other surrounding areas, but due to South Korea and Japan trade disputes, as a result, the passenger numbers on Japanese routes plummeted, and China's covid that followed caused passenger numbers on the Chinese routes to plummet further. The emergence of covid in South Korea caused travel demand to plummet. In this case, the survival of the airline company will only be more difficult. In addition, Air Busan is still working on negotiations with leasing companies on whether it is possible to delay the payment of lease fees.
Professor Li Guoxian from Korea University of Korea’s School of Economics and Economics explained that since the late 2000s, in order to support the local economy, the South Korean government has issued a number of small and medium-sized civil airlines business licenses in South Korea. During the period, more than 10 low-cost airlines including Air Busan were generated, but due to excessive reliance on short-haul routes such as China and Japan, and the competition of low-cost airlines from South Korea, China, and Japan are too fierce, these lead to a decline in these airlines' profitability. Therefore, a few South Korean low-cost airlines have experienced bankruptcy such as Air Philip, Air Pohang and lately Korea Express Air as they cannot even pay for aircraft leasing costs, and are eventually forced to go bankrupt.
"However, because Air Busan is backed by a large airline company and cooperates with commercial customers in Busan, the second largest city in South Korea, it has always been operating well. If even Air Busan has a dilemma that may not be able to pay the lease fee, then other airlines' situation will only get worse." Li Guoxian said.
StayGate's Notes:
According to official South Korean data, as at 25 February 2020, a total of 977 patients have been diagnosed with covid in South Korea, becoming the second largest country diagnosed after China. The speed is increasing rapidly and due to the impact of the domestic epidemic prevention situation in Korea, 13 countries or regions have issued immigration control measures to South Korean citizens, according to South Korea ’s largest travel agency HANATOUR.
Korean Air and Asiana Airlines have also announced that after cancelling some of the China-South Korea routes, all domestic routes at Daegu Airport have since been cancelled for a limited period from 24 February. Other airlines such as Air Macau, Malaysia Airlines and Singapore Airlines have also announced the reduction or suspension of flights to South Korea.
/ KUCINTA SETIA
Recently, China Business News reporter learned from the Head of Air Busan that due to the impact of reduced travel demand that may be caused by the COVID-19 (covid, in short) epidemic in South Korea, the airline decided to take into account the attitude of the person in charge of investors. All executives, including the CEO and the general manager, will submit their resignations and return 30 per cent of their annual salaries to help the company overcome difficulties.
According to the above information, the company's executives will be divided into required personnel and non-essential personnel. Non-essential personnel will leave the airline immediately after submitting resignations, while required personnel will leave the company after the epidemic is over.
In addition, Air Busan will deduct 10 per cent of salaries for middle-level cadres, and will implement rotating unpaid vacations for all grass-roots employees, and ground all flights to 25 China, Hong Kong, Macau, Taiwan and Southeast Asia airports, as well as all flights with Daegu as the destination or departure point that will account for nearly 70 per cent of Air Busan's total flights.
Air Busan is a low-cost airline and the joint venture between South Korea ’s second largest airline Asiana Airlines and the Busan City Government. Based on the 2018 annual report, it is the only low-cost airline that generated net profit of 20.6 billion Won. However, although the company's 2019 annual report has not yet been released, the analysis given by the top ten brokers in South Korea on Air Busan's financial performance is all a loss. If the forecast is confirmed, Air Busan will also usher in the first loss in 10 years.
Air Busan currently operates flights to 33 cities including 13 cities in China, Hong Kong, Macau and Taiwan. After the emergence of covid in China, the airline has reduced some flights to these destinations.
The person in charge of Air Busan verified the above information with the First Financial Reporter and revealed that due to restrictions on route allocation and aircraft types, its low-cost flights are mainly concentrated in China, Japan and Southeast Asia and other surrounding areas, but due to South Korea and Japan trade disputes, as a result, the passenger numbers on Japanese routes plummeted, and China's covid that followed caused passenger numbers on the Chinese routes to plummet further. The emergence of covid in South Korea caused travel demand to plummet. In this case, the survival of the airline company will only be more difficult. In addition, Air Busan is still working on negotiations with leasing companies on whether it is possible to delay the payment of lease fees.
Professor Li Guoxian from Korea University of Korea’s School of Economics and Economics explained that since the late 2000s, in order to support the local economy, the South Korean government has issued a number of small and medium-sized civil airlines business licenses in South Korea. During the period, more than 10 low-cost airlines including Air Busan were generated, but due to excessive reliance on short-haul routes such as China and Japan, and the competition of low-cost airlines from South Korea, China, and Japan are too fierce, these lead to a decline in these airlines' profitability. Therefore, a few South Korean low-cost airlines have experienced bankruptcy such as Air Philip, Air Pohang and lately Korea Express Air as they cannot even pay for aircraft leasing costs, and are eventually forced to go bankrupt.
"However, because Air Busan is backed by a large airline company and cooperates with commercial customers in Busan, the second largest city in South Korea, it has always been operating well. If even Air Busan has a dilemma that may not be able to pay the lease fee, then other airlines' situation will only get worse." Li Guoxian said.
StayGate's Notes:
According to official South Korean data, as at 25 February 2020, a total of 977 patients have been diagnosed with covid in South Korea, becoming the second largest country diagnosed after China. The speed is increasing rapidly and due to the impact of the domestic epidemic prevention situation in Korea, 13 countries or regions have issued immigration control measures to South Korean citizens, according to South Korea ’s largest travel agency HANATOUR.
Korean Air and Asiana Airlines have also announced that after cancelling some of the China-South Korea routes, all domestic routes at Daegu Airport have since been cancelled for a limited period from 24 February. Other airlines such as Air Macau, Malaysia Airlines and Singapore Airlines have also announced the reduction or suspension of flights to South Korea.
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