Demanding Raises
As its merger with Korean Air stalls, troubled Asiana Airlines is facing an intensified strike by its pilots’ labor union. The pilots’ labor union is demanding a 10 percent raise after a four-year wage freeze that started in 2019, but the management is sticking to a 2.5 percent increase, citing the lack of its business normalization.
According to industry reports on July 12, the Asiana Airlines pilots’ labor union will give its members enhanced strike guidelines on July 13 and go on strike in earnest on July 14. The labor union’s strike focuses on increasing the real cost of flying, which is maximizing fuel usage by accelerating to full throttle during takeoffs and using lift devices earlier during landing.
The labor union’s enhanced strike guidelines come as the labor union leadership has recognized the limited effectiveness of the flight delay strike it has been conducting since last month. The labor union has been delaying flights since June 6, including by strictly holding pre-flight crew briefings as required, but the management has remained adamant in its stance, so the labor union decided to step up its efforts. If this does not work, the labor union’s plan is to go on strike in late July. If it does happen, it will be the first strike in 18 years.
Asiana’s labor and management have been negotiating over wage increases since October 2022, but the two sides have failed to iron out their differences. The labor union is asserting that a large increase is necessary this time because wages have been frozen since 2019, while the management’s position is that it is difficult to raise wages because the company still has a long way to go to get back to business as usual.
As the labor union’s struggle intensifies, Asiana is expected to face further trouble. Although Korean Air has emerged as a new buyer and signed a merger and acquisition agreement, the merger review process is taking longer than expected. Korean Air had no trouble getting approval for its marriage with Asiana from 11 countries, including China, the United Kingdom and Turkmenistan, but it is having trouble negotiating with the three remaining countries -- the United States, the European Union, and Japan.
Industry analysts say Asiana is under the control of its creditors, which means it does not have many options when it comes to wage negotiations. A key part of the process is to normalize operations through cost cutting, cost management, and efficiency improvements, as Asiana is still heavily indebted and has a significant interest burden. In the first quarter of this year, Asiana posted an operating profit of 92.6 billion won (US$72.6 million) on a standalone basis. But after excluding interest expenses and foreign exchange gains, it posted 62 billion won in net losses.
The biggest burden is a delayed money inflow due to a delay in the merger. Korean Air plans to inject a total of 1.5 trillion won into Asiana through a third-party allotment capital increase. Of this amount, 700 billion won -- 300 billion won as a down payment and 400 billion won as a middle payment -- has been injected in advance, and the remaining 800 billion won will be injected only after the merger review is completed. Asiana spent 370 billion won alone in financial expenses such as aircraft lease payments in 2022. This is why some experts say that Asiana may not be able to survive if it does not quickly receive funds.
Korean Air, meanwhile, is at odds with its pilots’ labor union in its wage talks. The pilots’ labor union is asking for a 17.5 percent raise, while the management is offering 2.5 percent. The pilots’ labor union is taking a hard line stance, threatening to go on strike for the first time in seven years since 2016. Korean Air had earlier reached a tentative agreement with the general labor union, which does not include pilots, for a 3.5 percent wage hike on July 5.