Losses Estimated to Top 6 Tril. Won in Q1 Alone
The South Korean government is considering increasing its liquidity support for low-cost carriers (LCCs) from 300 billion won.
Earlier, the government announced in February this year that Korea Development Bank and the Export-Import Bank of Korea would supply a liquidity of 300 billion won to LCCs, which are taking a direct hit from the COVID-19 pandemic. The coronavirus has resulted in a 98.1 percent decline in the LCCs’ international flights and their losses are estimated to exceed 6 trillion won in the first quarter of this year alone.
The additional liquidity supply is likely to take some time in that the initial support budget is yet to be fully executed. At present, the budget execution stands at around six billion won for T’way Air, 20 billion won for Air Seoul, 30 billion won for Air Busan, 40 billion won for Jeju Air and 30 billion won for Jin Air. The additional assistance is likely to be carried out after the first budget execution is completed.
Some in the market are pointing out that the additional liquidity supply is more than necessary. “The South Korean LCC industry is in oversupply as compared with those of the United States, China and Japan and, as such, it cannot be said that the liquidity supply is appropriate,” one of them mentioned.