Asiana Airlines goes into deeper debt amid stalled merger with Korean Air Lines

Asiana Airlines’ financial health is deteriorating rapidly amid stalled integration with the largest full-service carrier Korean Air Lines and few signs of normalization in international air transport.

Asiana Airlines managed to generate operating profit in the third quarter thanks to strong demand for cargo deliveries, but the increase in debt exceeded its capital.

According to its disclosure on Tuesday, Asiana Airlines’ total capital account balance reached 329.2 billion won with equity of 372 billion won in September, an erosion rate of 11 percent.

Depreciated capital occurs when the total capital of a company falls below the face value of its share capital.

Asiana Airlines has been struggling with a liquidity crisis for almost two years. Its capital had completely eroded from the first quarter of 2020. It avoided the crisis by issuing perpetual bonds. When the erosion rate reached 50 percent again in the third quarter, the company made a capital reduction late last year.

This is the third erosion of capital despite the injection of 1,000 billion won by Korean Air Lines as part of the acquisition program.

Asiana Airlines first received 300 billion won as an upfront payment from Korean Air Lines and 400 billion won later. The fund was not used as the airliner made a profit despite stopping passenger travel on robust cargo business, Asiana explained.

Asiana Airlines’ debt ratio jumped to 3,668.34 percent in the third quarter, from 1,343.80 percent at the end of last year, after reflecting the 106.9 billion won penalty resulting from 2015-2017 losses, he said.

Current liabilities stood at 5.15 trillion won, exceeding liquid assets by 1.83 trillion won. The amount of debt maturing in one year is estimated to have reached around 3 trillion won, including short-term debt of 2.56 trillion won.

Its cumulative operating profit up to September of this year has reached 244 billion won, but it is not enough to repay interest which increases to 309.2 billion won, including dividends on bonds. perpetual.

State lender of Korea Development Bank (KDB) Chairman Lee Dong-gull on Tuesday called for a swift review of antitrust approval for Asiana Airlines and Korean Air Lines’ marriage amid signs alarming financial health of Asiana Airlines which could increase the cost of the bailout.

Domestic and overseas antitrust approval for its union with Korea’s first full-service carrier has stalled since the start of this year. Korea’s Fair Trade Commission plans to complete its review and report to the National Assembly later this year, which means final approval would be given next year. It is looking for ways to control the monopolization of the only integrated full-service carrier.

Other states are in no hurry either. The EU and Japan haven’t even started a review.

By pulse

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Valerie J. Wallis