[Asia Economy Reporter Chunhee Lee] Due to the spread of the novel coronavirus infection (COVID-19), the number of train passengers has decreased by about 70% compared to the previous year, plunging Korea Railroad Corporation (KORAIL) into an emergency management situation where a deficit of up to 1 trillion won is expected this year. It is currently expected to incur an operating loss of 600 billion won in the first half of the year alone. KORAIL plans to overcome the crisis through cost reduction via intensive structural reform.
Son Byung-seok, president of Korea Railroad Corporation (KORAIL), said at a press conference held on the 30th at the Ministry of Land, Infrastructure and Transport press room in Sejong, "As COVID-19 worsened and social distancing was implemented, the boarding rate dropped by 70% compared to the previous year," adding, "An operating loss of 600 billion won is expected in the first half of this year." He revealed future plans, stating, "We are drafting an emergency plan to reduce costs by 200 to 300 billion won compared to the initial plan to ensure the annual deficit does not exceed 1 trillion won."
Specifically, President Son announced intensive structural reform. He explained that the purchase cost of new trains, which accounts for a large portion of total expenses, is an essential safety cost and difficult to reduce, and that artificial workforce restructuring is also difficult due to the nature of a public enterprise. He expressed determination, saying, "We must eliminate inherent inefficiencies and waste factors and transform into a competitive organization."
Going forward, KORAIL plans to make significant changes to its three-tier organizational structure consisting of 'headquarters - 12 regional headquarters - field (stations and business offices).' Currently, the 12 regional headquarters located in small and medium-sized cities will be consolidated. The plan is to resolve regional imbalances and improve efficiency through this. Additionally, KORAIL intends to optimize personnel without distinguishing between headquarters and field, utilizing this for current issues such as improving work systems, safety personnel, and new areas. President Son said, "There are more than 1,000 small organizations such as KORAIL business offices and maintenance teams in the regions," adding, "We will consolidate affiliations to secure organizational flexibility."
Meanwhile, it was revealed that KORAIL had manipulated customer satisfaction data for several years. Some employees pretended to be customers and interfered with customer satisfaction surveys to manipulate the results. In response, the Ministry of Land, Infrastructure and Transport identified 208 employees from 8 of the 12 KORAIL regional headquarters who responded to the customer satisfaction survey, and requested investigation for 16 of them. Relatedly, KORAIL recently received a 'D' grade, deemed 'insufficient,' in the public enterprise management performance evaluation. According to the evaluation, KORAIL employees will not receive performance bonuses.
Accordingly, an innovation committee composed of labor, management, and experts will establish plans to innovate organizational culture. President Son stated, "We take this as a stern warning regarding the violation of the value of fairness pursued by our society," and added, "There has been much internal reflection due to the loss of public trust caused by consecutive railroad accidents, accounting errors, strikes, and other issues."
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