Businesses get mixed signals amid heat waves, toughest social distancing rules

South Korean businesses across all industries are undergoing an unprecedented double whammy of scorching temperatures and the toughest-ever social distancing rules under the COVID-19 pandemic.

Companies in different sectors appear to be showing mixed reactions to what could be the most difficult season, as they are not only concerned about aggravating working conditions for employees, such as the latest government control on power consumption and more stringent virus prevention measures, but also further impact on the overall economy.

The country‘s conventional heavy industries, among others, are striving to operate their businesses as usual under tough conditions.

As the strictest-ever social distancing measures were implemented just before the peak summer vacation season, airliners, who had high hopes to welcome back travelers, expressed their frustrations.

“Things started to get better as the COVID-19 outbreak slowly subsided, but new daily cases are back into four digits again. Many air carriers are already bleeding losses, so if they can’t make the most of the peak summer vacation season, some of them won’t make it,” an aviation industry official said.

According to the Korea Civil Aviation Association, the number of domestic flight passengers, a vital stream of revenue for low-cost carriers, is in a downward spiral. From June 27 to July 4, the number stood at 1.42 million. In the first seven days since the Level 4 social distancing measures took effect on July 12, the figure plunged to 1.32 million.

“Korean Air and Asiana Airlines can survive the pandemic through cargo flights, but LCCs depend entirely on domestic flights. If COVID-19 spreads all across the country, not just within the Greater Seoul area, the domestic flights will be gone too,” an LCC official said.

The damage to the aviation industry has spilled over to oil companies, who supply aviation fuels for the aircraft carriers.

“When airliners redirected their flights for cargo, oil refineries had a rebound. Just when we thought passengers were coming back, the Level 4 social distancing measures dealt a blow to us,” a Hyundai Oilbank official said. Hyundai Oilbank last year cut production of aviation fuels to 9.8 million barrels from 20 million barrels a year prior.

SK Incheon Petrochem, an affiliate of SK Innovation, says the company is in a similar situation, as its revenue from aviation fuels in the second quarter was about 60 percent of last year.

Meanwhile, shipbuilders, automakers and construction companies are making all-out efforts to protect their field workers from another enemy: scorching summer heat.

According to industry sources, Samsung Heavy Industries has installed 250 air conditioners inside a ship under construction and placed 114 ice machines and 340 water coolers all across its shipyard.

Welders who work surrounded by steel sheets are given air-cooling jackets in which pressurized air is constantly circulated.

Also, Samsung Heavy Industries is offering traditional Korean foods thought to be good for stamina, such as chicken soup and grilled eel.

At Hyundai Motor’s Ulsan factory, 38,000 workers will be given 40,000 ice cream treats every day through next month. In case of a potential blackout, the automaker has installed backup generators and is saving electricity in every field except production.

The country’s No. 1 steelmaker Posco is operating flexible working hours for those who work inside fire-resistant suits, allowing them to work 40 minutes and rest 20 minutes when a heat wave advisory is issued. In case of heat wave warnings, that will be 30 minutes of work and 30 minutes of rest.

Construction companies are carefully monitoring the temperatures of their workers, who are susceptible to heat illnesses as they carry out physically demanding tasks with masks on all the time.

GS Engineering & Construction is limiting workers from working outside if the temperature surpasses 35 degrees Celsius and a heat wave warning is issued. If the temperature goes up beyond 37 degrees Celsius, working in the basement or working alone is banned.

Posco Engineering & Construction is providing rest to older workers and those with high blood pressure if the temperature exceeds 33 degrees Celsius.

But the story is different for the retail industry, especially for the e-commerce sector.

Both offline and online retailers are enjoying another boon from the protracted pandemic situation with Level 4 social distancing rules as well as the heat waves that encourage consumers to open their wallets for new summer products.

According to Emart24, revenue from its delivery service saw a month-on-month increase between June 19 and July 18.

During the second week of July with higher temperatures, the convenience store chain saw the number of deliveries rise by 60 percent and revenue by 95 percent compared to a month prior -- the highest figures since the delivery service was launched.

“The number of customers using a delivery service has jumped significantly due to heat waves, heavy rains and the coronavirus,” one official at Emart24 said.

It has been a similar story for beauty store Olive Young.

As stricter social distancing rules were rolled out, the company enjoyed an uptick in online order volume via same-day delivery in Seoul and surrounding areas – up 23 percent between last week compared to the previous week.

Supermarkets saw an increase in food sales. At E-mart, sales of fruits, vegetables and meat rose by 4 to 7 percent between July 12 and 15. Over the same period, Lotte Mart‘s overall revenue increased by 8.9 percent, with instant noodles and prepackaged meals enjoying a 10 percent and 13.5 percent increase, respectively, from the previous week.

Major department stores including Hyundai, Lotte and Shinsegae, however, saw their revenue drop by between 13 and 16 percent last week.

Though July is considered an off-peak season, a cluster of COVID-19 infections at Hyundai Department Store’s branch at Coex in Gangnam, Seoul, earlier this month forced the location to close down for a week, denting consumer confidence.

Cases were also found at other department stores, including Galleria Department Store and Shinsegae Department Store’s Gangnam locations.

“We are ramping up COVID prevention measures, keeping in line with the Level 4 social distancing rules. Hyundai’s Coex branch, for instance, has introduced a QR code check-in system for the first time in the retail industry,” one industry source said.

Having rolled out discount deals ahead of the new social distancing rules, the alcohol industry is keeping an eye on the number of cases without drastically changing its strategy for the time being.

Earlier this month, HiteJinro said it would cut the price of its canned flagship lager Terra by some 15 percent, while Oriental Brewery reduced the price of canned Hanmac by 10.4 percent in June.

“The decision (to reduce the price) was not due to the Level 4 social distancing rules, but as a result of the ongoing pandemic that has continued so far,” one official at OB said.

“Things are suddenly changing every few weeks and it is hard to draw up measures each time. In the long term, it seems ideal to focus on home drinkers rather than bargoers during this pandemic,” the official added.

By Yim Hyun-su (hyunsu@heraldcorp.com) and Kim Byung-wook (kbw@heraldcorp.com)