Korean Air, the largest airline in South Korea, is currently fighting for survival after the outbreak of the coronavirus has forced them to ground thousands of flights.
As of writing this article, South Korea has been the third worst affected nation by the virus, reporting 7755 cases across the country. This has led to many countries around the world imposing entry restrictions on South Korean flights.
The combination of travel restrictions and weak global demand for air travel has put the airline in a very precarious position. The company, having already cut more than 80% of its international flight capacity, has now begun asking employees to take voluntary leave in an attempt to boost cash flow and avoid a financial disaster.
The president of Korean Air issued a stark warning to all employees this week, warning them that the already cash-strapped airline may not even survive if the situation continues for much longer.
Unlike many big airlines around the world, Korean Air has no government ownership and therefore cannot rely on government funding to bail them out. That being said, as the national carrier and largest airline in the country, we could see the government intervening with a rescue deal as a matter of national pride.
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term cash flow problem?
Q2. Explain one way that the government could intervene to rescue Korean Air.
Q3. Analyse the reasons why Korean Air is having cash flow problems.
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