SEOUL, April 20 (Korea Bizwire) — Korean Air Lines Co., South Korea’s biggest carrier, is considering stock offerings worth up to 1 trillion won (US$820 million) as part of self-help measures amid the growing coronavirus impact on the airline sector, financial sources said Monday.
Korean Air is in talks with major securities companies to raise up to 1 trillion won by selling new shares, an investment bank official familiar with the matter told Yonhap News Agency.
“Stock offerings are one of various options the company is considering (to ride out the coronavirus crisis),” a company spokeswoman said by phone.
The company, however, did not confirm a potential capital increase with consideration.
On Monday, Korean Air fell 6.5 percent to end at 19,550 won on the news and its parent Hanjin KAL Corp. plunged 26 percent to 81,000 won, far underperforming the broader KOSPI’s 0.8 percent loss.
Korean Air has suspended most of its flights on international routes, as an increasing number of countries have closed their borders or taken further measures related to incoming passengers.
Korean Air currently serves 50-55 flights a week on 13 international routes, sharply down from more than 900 flights on 112 long-haul routes seen before the airline industry was hit by the COVID-19 pandemic.
On Tuesday, the Korea Investors Service downgraded the credit rating of asset-backed securities (ABS) issued by Korean Air from “A” to “A-”.
An airline’s ABS is mainly based on the proceeds from future ticket sales and therefore serves as a key means of operating capital for carriers.
As part of self-rescue efforts, Korean Air had 70 percent of its 20,000-strong workforce take paid leave for six months from Thursday 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.
Last month, the Korean government announced it would inject 300 billion won into low-cost carriers. Full-service carriers like Korean Air have also demanded emergency financial aid from the government.
It is urgently needed for the government to extend low-rate loans that require no collateral, to give a debt guarantee for their corporate bonds, and to cut taxes for planes and airport usage fees, industry officials said.
Korean Air is widely expected to report poor earnings results in the January-March quarter, and an earnings shock is likely for this year if the coronavirus outbreak prolongs throughout the year.
Korean Air’s net losses widened to 624.87 billion won last year from 185.65 billion won a year earlier due to a weak won and lower demand.