News
Korean Air announces US$1.8 billion liquidity boost
May 15th 2020
Korean Air (KAL) said on Wednesday it planned to raise 2.2 trillion won (US$1.8 billion) through a share issue and government support from two state-owned banks to boost liquidity. Read More »
The capital raising aimed to raise 1.1 trillion won through the sale of about 79 million shares priced at 12,600 won a share. The price represented a 31% discount from KAL’s closing share price on the Korea Stock Exchange on Wednesday of 18,200 won a share.
KAL said the shares would be first offered to existing shareholders, such as the largest shareholder, Hanjin Kal, which has 30% equity in the airline, before the sale was opened to the general public. The final issue price would be confirmed on July 6, with the new shares to commence trading on July 29.
Meanwhile, KAL said it would receive 1.2 trillion won in government aid through the Korea Development Bank and The Export-Import Bank of Korea.
The package is 700 billion won of asset-backed securities based on cargo sale bonds, 300 billion won of perpetual bonds with stock conversion rights and an asset-backed loan of 200 billion won.
"Korean Air will continue to carry out self-rescue measures to overcome the dismal business environment due to COVID-19," the airline said in a statement.
This month, KAL has been flying 55 flights a week on 13 international routes as travel restrictions imposed by governments around the world to slow the spread of the coronavirus collapsed demand for air travel.
In a sign the tide might be turning, the airline said recently it planned to increase its international network to 32 destinations and 146 flights a week in June to "prepare for increased travel demand as COVID-19 restrictions were lifted in countries around the world".
Despite the planned increase, KAL’s international network for the month represented about 20% of planned operations. The airline had 110 destinations in its international network prior to the pandemic.
In April, the SkyTeam alliance member said 70% of its staff in South Korea would be placed on a six months leave of absence because of the deteriorating business environment created by the pandemic.
Affected staff would receive about 70% of their normal pay, the bulk of which would be funded by the South Korean government under a special scheme set up in response to COVID-19, local media explained.
Executives have taken salary cuts and the airline group has announced plans to sell non-core assets including a property located at Songhyeon-dong near the Gyeongbok Palace in Seoul, and its Wangsan Leisure Development Co subsidiary, which runs the Wangsan Marina resort in Incheon.
KAL is scheduled to announce its first quarter financial results shortly. Aviation watchers are expecting an operating loss in the vicinity of 240 billion won for the carrier, according to local media.
