S Korea adopts measures that will further squeeze airports, toll road operators

The measures which, the government is adopting in light of the coronavirus pandemic, amount to $448.5m and are aimed to help airlines and toll road users.

The South Korean government has announced a series of measures that will cost a total of $448.5 million in order to soften the impact airlines and toll road users are facing due to decreased traffic and travel restrictions imposed in an effort to contain the spread of coronavirus.

Last week, the Ministry of Economy and Finance said it would waive airline parking charges and reduce landing fees, as well as ensure airlines maintain their operating rights and allocated slots. This expands on the government’s move last month, when the same measures applied specifically to South Korea-China routes.

The suspension of parking fees over a three-month period amounts to 65.6 billion Korean won ($51.5 million; €48.3 million) and the reduction in landing fees for two months reaches 500.5 billion Korean won.

Airports’ revenues will also be squeezed further with the government allowing retail shops to defer payment of rental fees for three months beginning from March. Small- and medium-sized shops will see a 25 percent reduction to their rental fees through August.

Incheon International Airport Corporation said it would see a significant loss in revenues during the first half of this year but declined to provide an estimate.

In 2018, the airport reported revenues totalling 2.73 trillion Korean won. More than half, 52 percent or 1.08 trillion Korean won, was from duty-free shop rental fees, IIAC said in a statement.

In addition, the government support measures may continue into the second half of the year if the pandemic continues to escalate. “We are considering cutting airline landing fees even after flight operations get back to normal,” a spokesman for the Ministry of Land, Infrastructure and Transportation told Infrastructure Investor.

As of the second week of March, the number of airline passengers in South Korea dropped by 91.7 percent compared with the previous year. At Incheon International Airport, the average number of daily passengers fell to 16,000 from 190,000 compared to a year earlier, recording the lowest passenger volume since the airport began operating in 2001. South Korean airports are expected to lose 4.98 million passengers through June, MOEF said.

Under South Korea’s aviation laws, airlines would lose their rights for allocated routes if service were to fall below 20 weeks per year, while they could lose their allocated slots if usage slips below 80 percent per season. This policy is now being suspended for an unspecified period.

Tolls waived

The government is also waiving toll road fees for at least a month. According to a recent report by Moody’s, traffic volume on toll roads operated by state-owned Korea Express Corporation, has dropped 20 percent since mid-February.

All the airport and highway operators are state-owned companies: IIAC, Korea Airport Corporation and KEC.