Korean Air closes inflight unit sale, extends wage freeze

Korean Air (KE, Seoul Incheon) and the Korean Air Labour Union have agreed to freeze wages and keep 70% of employees on furlough during the first half of 2021 as the airline continues to cut costs to cope with the impact of Covid-19, the Yonhap News Agency reported. The same percentage of the company’s approximately 18,000 employees, about 12,600 employees, have already been taking unpaid leave since April. The management and the union have agreed to maintain these conditions until at least June 30, 2021, as the alternative would be mass redundancies. “We are faced with an unprecedented emergency situation due to the fallout of Covid-19,” the union explained in a statement. “The labour union and the management are sharing the burden by selling assets, cutting costs, and keeping furlough programmes to maintain employment.” However, the union insisted that 50% of this year’s bonus for “family month” – the month of May in South Korea – be paid by the end of 2020, which Korean Air promised to do. Simultaneously, the management assured the union that “there is no review on the separation of MRO” from the company, in response to a flurry of recent local media reports claiming that Korean Air had been considering the sale of its maintenance business. Korean Air has, however, now completed the sale of its inflight catering and duty-free business to Seoul-based private equity firm Hahn & Company for KRW990.6 billion won (USD895 million), the Maeil business newspaper reported. As was outlined in August when the deal was announced, on the same day that the acquisition closed, December 17, the flag carrier acquired a 20% stake in Korean Air C&D Service Co., a new company that Hahn established to house the inflight business, for KRW96.3 billion (USD87 million). This means that Hahn & Company owns 80% of the newly created holding company, Korean Air 20%. Hahn will manage Korean Air C&D Service as the largest shareholder while the airline will sign a contract with the new company to access its meals and duty-free products.