Korean Air aircraft at Incheon International Airport, west of Seoul. (Yonhap)
SEOUL, April 24 (Korea Bizwire) — South Korea’s two state-owned lenders said Friday that they will inject 1.2 trillion won (US$972 million) into the country’s top airline, Korean Air Lines Co., to help the company weather the impact of the COVID-19 outbreak on the airline sector.
The Korea Development Bank (KDB) and the Export-Import Bank of Korea (Exim Bank) plan to extend fresh capital to Korean Air, as the country’s flag carrier is in dire need of liquidity following suspended flights, the KDB said in a statement.
In the financial assistance, the two lenders will extend a loan of 200 billion won to Korean Air for operating capital, purchase 700 billion won worth of securities backed by future cargo deliveries and buy the carrier’s 300 billion won in perpetual bonds convertible into stocks, a KDB official said.
If the lenders convert the perpetual bonds with no maturity date into Korean Air stocks, they will have a collective 10.8 percent stake in the carrier, he said.
The two creditor banks made the decision as the national flag carrier agreed to take measures to improve its financial status through sales of assets, job guarantees for employees and dividend restrictions, it said.
Korean Air welcomed the aid package, saying it will put top priority on putting the airline industry back on track and enhancing its financial health.
As part of self-rescue efforts, Korean Air had 70 percent of its 20,000-strong workforce take paid leave for six months from April 16 and is in the process of selling non-core assets to secure cash.
Korean Air has to repay or refinance 240 billion won worth of corporate bonds maturing this month and shoulder up to 500 billion won in fixed costs a month.
The news sent Korean Air 0.3 percent higher at 19,800 won and its parent Hanjin KAL Corp. 9.3 percent higher at 93,000 won, outperforming the broader KOSPI’s 1.3 percent loss.
On Tuesday, the two policy lenders also said they will inject 1.7 trillion won into Asiana Airlines Inc., the country’s second-biggest airline, to help it stay afloat and dispel growing concerns that the creditor banks’ plan to sell Asiana may fall through due to the virus impact.
In December, the consortium led by HDC Hyundai Development Co. signed a deal to acquire a 30.77-percent stake in Asiana from Kumho Industrial Co., a construction unit of Kumho Asiana Group, as well as new shares to be issued and the airline’s six affiliates, for 2.5 trillion won.
HDC said Friday it is in the process to acquire Asiana by the end of April, dismissing speculation that it may have difficulties in taking over the airline due to fallout from the coronavirus outbreak.
Local airlines have suspended most of their flights on international routes as an increasing number of countries have enacted entry restrictions amid virus fears.
South Korea has two full-service carriers — Korean Air and Asiana — and seven low-cost carriers (LCCs) — Jeju Air, Jin Air Co., Air Busan Co., Air Seoul Inc., Eastar Jet, T’way and Fly Gangwon.
Last month, the government announced it would inject 300 billion won into LCCs. Full-service carriers also demanded emergency financial aid from the government.
(Yonhap)
