[Viewpoint] Seoul City Trying to Take Korean Air's Assets While It Struggles to Survive

Choi Joon-sun, Honorary Professor at Sungkyunkwan University School of Law

It finally seems that Seoul City's plan to acquire private land is succeeding. No one submitted a letter of intent for the preliminary bid on Korean Air's land in Songhyeon-dong, Jongno-gu. Seoul City's plan to create an urban park is progressing smoothly without any setbacks. The Seoul Public Development Planning Team has already announced the 'Bukchon District Unit Plan Amendment' to change the Songhyeon-dong land into a cultural park. Residents can review the announcement from the 5th to the 19th, a period of two weeks. The outcome of the review is predictable. With Gyeongbokgung Palace right next door and an urban park being created, this area will become the most pleasant residential environment nearby. The already expensive surrounding real estate prices are skyrocketing. As housing prices rise and the living environment improves, who would oppose this?

Korean Air wants to dispose of this land as part of its self-help plan to secure emergency management funds. The Korea Development Bank and the Export-Import Bank of Korea injected emergency management funds worth 1.2 trillion won into Korean Air, which faced a liquidity crisis due to the COVID-19 pandemic. Government support was inevitable for this company, which operates the national core industry of air transportation. The U.S. government decided to invest $58 billion (approximately 71.44 trillion won) in airline support. Germany set unlimited financial support for its national airline, Lufthansa.

In response to this unprecedented support, Korean Air prepared a stringent self-help plan including restructuring and maintaining employment. First, as demanded by creditors, it must increase its capital by about 2 trillion won by the end of 2021. Accordingly, it pursued a 1 trillion won paid-in capital increase and the sale of the Songhyeon-dong site and shares in Wangsang Leisure Development. All foreign pilots have been on leave without pay for three months since April. The unpaid leave is set until July. It is uncertain whether they can return in August. The company is accepting unpaid leave applications for up to one year from flight attendants who have worked for more than two years. It is already implementing rotational leave for 70% of its workforce. Executive salaries have been cut by 30% to 50% for three months. Currently, out of 110 international routes, only 25 routes operate 115 flights per week. The international flight reservation rate this month is only 32%.

When a company on the brink of survival tries to sell its assets, Seoul City was accused of 'undervaluing the land.' The city plans to buy land valued between 500 billion and 1 trillion won at an appraised price of 467.1 billion won. Jongno-gu's annual total budget is 600 billion won, and Seoul City's urban park compensation budget is 507 billion won this year. The city would have to spend its entire park budget this year to buy this land. Since that is impossible, Seoul City plans to pay the land price in installments until 2022. Ultimately, Korean Air's self-help plan seems to have been flawed from the start. Korean Air employees are anxious about indefinite delays in returning to work and fear possible layoffs.

Once the urban plan is finalized, the land cannot be sold elsewhere. Even if there is dissatisfaction with the compensation amount based on the appraiser's valuation, protesting is futile. The case eventually goes to the Land Expropriation Committee, which generally upholds the appraised value. Even in court, the conclusion remains unchanged. 'Expropriation' is when the state forcibly confiscates private property without consent. The justification is always 'public welfare,' but in essence, it takes property from a few to benefit many. Therefore, development policies are often suspected to be sophisticated vote-gaining strategies devised by politicians.

Seoul City has already received about 1,580 square meters in front of the SG Tower in Namdaemun as a cultural park donation as a condition for permitting the SG Tower construction. Why has this project not been implemented? What is the status of the plan to convert the ready-mix concrete factory in Seongsu-dong, Seongdong-gu, into a park without relocation measures? Is now, amid the chaos caused by COVID-19, the right time to create parks? It is regrettable, as it seems like they are trying to snatch the bundle from someone drowning rather than helping them.