Hanjin Group chairman Cho Won-tae told reporters on Wednesday that Korean Air has “no plans to initiate layoffs” if it takes over rival Asiana Airlines as the group will use the acquisition “as an opportunity to embrace all employees as part of the Hanjin family.” Cho also vowed not to hike airfares even though Korean Air would have a clear monopoly. Lee Dong-gull, the head of Asiana’s main creditor Korea Development Bank, also pooh-poohed concerns over massive layoffs once Korean Air acquires Asiana, telling an online news conference on Thursday, “Failing to retain workers would violate the contract.” He added that productivity can be improved just by refurbishing the routes offered by the two carriers and shoring up competitiveness. If the two men can be believed, a rosy future awaits everyone involved.
But a ground view paints a starkly different picture. On the very day Cho pledged not to shed any jobs, Southwest Airlines in the U.S. announced it may have to lay off 400 workers or 15 percent of its maintenance staff and technicians. Since the coronavirus epidemic started, airlines in the U.S. have announced the layoffs of more than 30,000 workers. The total number of workers employed by the U.S. airline industry is expected to fall from 460,000 in March to 370,000 in the fourth quarter of this year, according to some projections. At that rate, their numbers will shrink to the lowest level since the mid-1980s.
Here, Korean Air employs around 18,000 people and Asiana around 9,000. Even KDB estimates that between 800 to 1,000 workers overlap in terms of their responsibilities. Cho and Lee pledged not to lay anyone off, but what are these workers going to do? One manager at Asiana said, “Both companies have overlapping structures, which means workers will end up doing the same jobs, so the ones at Asiana will probably be sent off to do work they’ve never done before.” An manager at Korean Air said, “If you’re not going to lay off any workers and keep airfares flat, the only other solution is to cut salaries.” Korean Air and Asiana managed to achieve unexpected profits in the second quarter, but part of the reason was furloughs and pay cuts.
Before people get their hopes up for the creation of the world’s seventh-largest airline through the takeover, they need to take a good hard look at the reality. Taxpayers, after all, have a substantial stake in this too. KDB is state-run and has spent close to W5 trillion so far to keep both carriers afloat (US$1=W1,117). One business insider said, “If Korean Air manages to succeed after acquiring Asiana, the feat will be written about in business administration textbooks.” That is a big “if,” and the mega airline could easily turn into a gigantic disaster.
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