News
Korean Air faces $345 million Hanjin Shipping write-off
September 9th 2016
Korean Air’s (KAL’s) exposure to troubled sister company, Hanjin Shipping, is expected to deal a huge hit to the airline’s balance sheet this year. Read More » The South Korean flag carrier has forecast up to 383 billion won ($345 million) in losses related to its 33% stake in Hanjin Shipping, more than a third of its projected operating income this year. The giant shipping firm entered bankruptcy protection this week and some analysts say liquidation is a strong possibility.
The carrier’s shares reacted positively to Hanjin Shipping’s likely closure, hitting a 13-month high. "KAL's shares are expected to appreciate as its Hanjin-related risks will be gone," said Kyobo Securities analyst, Chung Yoo-seok. "Its financial conditions will improve gradually due to better operating profits, surpassing its interest costs."
The airline’s operating profit increased 158% in the first half, due to low oil prices and an increase in passenger numbers, but its net result was still negative after significant losses on its investment in Hanjin and foreign exchange fluctuations.
Korean Air and fellow SkyTeam partner, Delta Air Lines, this week made a significant codeshare announcement, resetting their difficult relationship that has been strained since Korean Air decided several years ago to refuse Delta’s invitation for a trans-Pacific revenue sharing alliance similar to those of All Nippon Airways /United and Qantas/Japan Airlines /American Airlines.
From late October, Delta will place its code on Korean Air flights to 32 destinations beyond Incheon, including Hong Kong, Taipei, Osaka, Singapore, Nagoya and Kuala Lumpur, as well as on flights to San Francisco, Houston and Atlanta.
Korean Air will add its code on Delta’s new Atlanta-Incheon B777-200LR route, (launching on June 3), on 156 of Delta’s domestic and Canadian routes ex Atlanta, Los Angeles and New York, as well as Delta flights from Atlanta and JFK New York to Sao Paulo. Korean Air will suspend its own flights to Sao Paulo from September 26.
Lessor GE Capital Aviation Services (GECAS) last week signed a purchase-and-leaseback transaction with Korean Air for five new B777 freighters as part of the carrier’s fleet renewal programme.
In other South Korean updates, an Asiana Airlines A330-300 was severely damaged earlier this week in a towing incident at Incheon Airport. Sources indicated the aircraft suffered substantial damage to its tailcone and horizontal stabilisers when it hit a hangar door. It is unclear if the auxiliary power unit was damaged. The 2012-built aircraft is owned by Blackbird Capital and is managed by Air Lease Corporation (ALC).
