Korean Air (003490.KS), South Korea's largest carrier, has declared an emergency management regime in response to the fallout from the Middle East war.
Korean Air announced through a company-wide notice on the 31st, issued under the name of Vice Chairman and CEO Woo Ki-hong, that it will shift to an emergency management regime starting in April.
"At the company level, we intend to switch to an emergency management regime as of April to prepare for rising costs driven by surging fuel prices, and to immediately implement phased response measures at each oil price level to pursue company-wide cost efficiency," Woo said.
Korean Air cited the persistence of abnormally high oil prices caused by the Middle East war as the backdrop for the emergency regime. The airline forecast that its April refueling unit price will reach approximately 450 cents per gallon. This is more than double the 220 cents per gallon baseline oil price used in Korean Air's business plan.
"The enormous fuel cost burden is mounting every month, and if the high oil price situation becomes prolonged, we expect serious setbacks in achieving our annual business plan targets," Woo said. He added, "These measures are not simply one-time cost cuts but an opportunity to strengthen our structural fundamentals, successfully complete the integration, and lay a stable foundation for future growth." He continued, "With the resilience we possess, we will be able to wisely overcome this crisis as well."
Since the outbreak of the Middle East war, profitability management amid high oil prices has emerged as the top challenge for the aviation industry. Low-cost carrier T'way Air was the first to implement an emergency management regime on the 16th. Asiana Airlines, which is set to be merged with Korean Air, also entered emergency management on the 25th.
Jin Air, Air Busan, and Air Seoul — low-cost carriers under the Hanjin Group — will also enter emergency management regimes starting next month. Jin Air officially declared the shift through a post on its internal bulletin board on the same day under the name of CEO Park Byung-ryul. Industry observers interpret that as the war drags on, other airlines will successively enter emergency management regimes as well.
