On the 3rd, the government announced measures to support the aviation industry, such as to provide additional funding to low-cost airlines (LCC). Deputy Prime Minister Hong Nam-ki and Minister of Strategy and Finance (right) and Minister of Land, Infrastructure and Transport Byeon Chang-heum are taking steps to attend the Emergency Economic Central Countermeasure Headquarters meeting. Reporter Kim Beom-jun [email protected]
The government has decided to invest up to 200 billion won additionally to low-cost airlines (LCC), which are suffering from the spread of the novel coronavirus infection (Corona 19), by the third quarter.
On the 3rd, the Ministry of Land, Infrastructure and Transport unveiled a plan to overcome the Corona 19 crisis in the aviation industry and take a new leap forward at a meeting of the Emergency Economy Central Countermeasure Headquarters held at the Seoul Government Complex on the 3rd.
The government provided 541.5 billion won of funding to the LCC after the Corona 19 incident last year. However, it is known that this fund was almost exhausted as the Corona 19 continued throughout the year and the demand for domestic travel plummeted accordingly.
The government has decided to provide additional funding, expecting that LCCs such as Jeju Air’s Jin Air T-way will reach 200 billion won by September this year. The specific timing and scale of support for each LCC was decided through due diligence.
The government also decided to consider whether to further reduce the aircraft acquisition tax and property tax. Aircraft acquisition tax is reduced by 60% from 2017 to this year, and property tax is reduced by 50% only to LCCs. Along with this, the government decided to promote △support for job security of airlines, △reduction of airport facility usage fees of 45.7 billion won, △diversification of non-landing international tourism flights.
All-out war on the revitalization of the aviation and travel industry… Easy entry and exit with the’Travel Pass’
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On the 3rd, the government issued additional support measures for the aviation industry. It included additional funding of 200 billion won for low-cost airlines (LCC), as well as measures to expand demand. Since last year, the government has already come up with support plans for the aviation industry several times and is putting efforts to prevent the collapse of the industry. However, it is still not enough. In December of last year, international passenger performance declined 97% compared to the same period last year, showing no signs of recovery. The International Air Transport Association (IATA) and others predict that it will take two to four years for aviation demand to recover to 2019 levels. Some voices say that additional restructuring needs to be considered.
○ Promote increasing demand for aviation
The government is preparing policies to reduce damage to the aviation and tourism industries at the same time. A representative example is the’Travel Bubble’, where the citizens of a country with COVID-19 quarantine can freely come and go. The Travel Bubble is a measure for both countries to lift the entry ban and ease quarantine for people with confirmed COVID-19 negatives. Compared to the fast track for supporting entrepreneurial activities, the purpose of the visit is not limited, so it can be widely used for tourism and simple visits. The government has set a goal to implement this within the year.
As a preparatory step for activating the travel bubble, it has also decided to introduce a Travel Pass. It is a device that allows you to check the results of the Corona 19 diagnostic test and whether or not to be vaccinated with a mobile app. If the number of countries allowed for the travel bubble increases, you can easily go through the immigration process using the Travel Pass.
It also came up with a plan to promote non-landing tourism flights. It is a tour product that leaves the airport by plane, travels around the airspace of another country, and returns without getting off to that country. Currently, non-landing overseas tourist flights, which can only be departed from Incheon Airport, have been made possible at local airports. Introduce’inbound’ (overseas → Korea) international tourism flight without domestic entry or departure. It is a method of leaving a foreign airport, flying over Korea, and then returning.
The government also decided to actively support mergers and acquisitions (M&A) between Korean Air and Asiana Airlines. The company plans to improve regulations so that it can support procedures such as overseas business combination screening for the integration of the two companies, and share transport rights and slots (number of flights per hour).
○“I need rice, but give me a blanket”
The airline industry, including LCC, welcomed such government support, but expressed regret that the timing and conditions of funding were unclear. An official in the aviation industry emphasized, “As most LCCs are likely to run out of cash after the first quarter, they need liquidity support right away.”
Jeju Air is a prime example. In the first quarter of this year, a similar level of deficit as last year will lead to capital erosion, leading to a liquidity crisis. There are criticisms that the government’s position to determine the scale of support for individual LCCs after the due diligence did not take into account this urgency. An airline official said, “It can be seen that the government gave the airline a’futon’ in cold weather.
The fact that the conditions for receiving policy fund support are not specified, raising concerns in the LCC industry. It is known that both inside and outside the government are reviewing measures to support policy funds on condition of self-rescue measures such as capital increase and asset sale. The LCC industry said, “I have used up all possible self-rescue measures in the current situation, such as a paid-in capital increase,” and said, “I only hope that the government will provide bolder and more aggressive customized support.”
As in last year, it is also of interest that the government will propose conditions such as’more than 500 billion won in debt’ for support. Jin Air and T’way Air, which have reduced their debt since before Corona 19, were excluded from the government support.
Reporter Jang Hyun-ju/No Gyeong-mok/Kang Gyeong-min [email protected]