While low-cost carriers gain traction in airline market, full-service carriers seek labor stability
Korea’s two full-service airline carriers are seeing different outcomes in conflicts with their respective pilot unions as they face a market that is becoming increasingly dominated by low-cost carriers.
Korean Air and Asiana Airlines have long been suffering from struggles with their pilot unions as negotiations about wage increases came to a standstill.
On Wednesday, Asiana Airlines’ pilot union announced through its website that it had reached a tentative agreement with its management for the years 2015 and 2016. According to the agreement, pilots’ base pay would rise 4 percent as of April this year, with a 2.4 percent increase in flight pay.
The agreement will be put to a vote by the whole union from Sunday to Nov. 29. If it passes, it will put an end to the conflict that began when labor negotiations fell through last September.
Meanwhile, Korean Air’s pilot union has announced that it will go on strike next month. The flagship carrier’s union has been protesting against the firm’s management since wage talks fell through last month, when the pilots requested a 37 percent increase in wages against the management’s offer of 1.9 percent.
On its website, the pilot union said that “the time has passed for us to wait on the management, which has shown no will to come to an agreement on the 2015 wage negotiations.”
The union had asked Korean Air to provide the number of pilots needed to maintain minimum services, but it has also said that the strike will take place even if the company does not respond.
However, even if the pilots do go on strike, they will be legally bound to keep most of Korean Air’s regular flights running. After a crippling strike in 2005 by Asiana Airlines pilots that caused widespread cancellations, the airline industry was designated a “critical public good industry” that would be protected against large-scale strikes. Under the designation, airlines must keep 80 percent of their international flights, 50 percent of domestic flights, and 70 percent of flights to Jeju in operation during strikes.
The larger issue is that of the company’s image, especially in the face of a changing market.
Both Asiana Airlines and Korean Air face fierce competition from low-cost carriers that are aggressively expanding their routes to match rising demand amid low oil prices.
According to the Ministry of Land, Infrastructure and Transport, low-cost carriers transported 20.4 percent of international passengers as of September, rising at a steady clip from 10.8 percent in 2014 and 14.5 percent in 2015.
The largest carriers, Jeju Air, Jin Air and Air Busan, all enjoyed record highs in operational profits in the third quarter of this year. In addition to increasing flights to popular short-haul destinations such as Japan and Thailand, LCCs have begun increasing international flights out of Busan in addition to Gimpo Airport in Seoul and Incheon Airport.
According to market analysts, next year’s extended Chuseok holiday is expected to bring some competitiveness back to full-service carriers whose main revenue comes from long-haul flights not serviced by low-cost carriers. Both Korean Air and Asiana Airlines are expected to push sales in long-haul flights in 2017 to set themselves apart from low-cost carriers as they continue to grapple with labor disputes.
By Won Ho-jung (firstname.lastname@example.org