Kumho Asiana Group will sell Asiana Airlines
The board of Kumho Industrial said Monday it would sell the airline in return for financial support from its creditors to revive Kumho Asiana.
Kumho Industrial, which is the controlling shareholder of Asiana Airlines, demanded 500 billion won ($438.8 million) from its creditors in return for the sale, according to its main creditor, the Korea Development Bank (KDB). Creditors did not respond Monday.
The decision was made after the KDB refused the group’s former Chairman Park Sam-koo’s request for a 500 billion won loan with the Park family’s stakes in Kumho Buslines, the group’s de factor holding company, pledged as collateral.
“We have been mulling ways to normalize Asiana Airlines’ business [and concluded] selling the airline is the [only] way for the group and Asiana Airlines to regain market trust,” said a spokesperson for Kumho Asiana. “We took into consideration the future development of Asiana Airlines, which boasts 30 years of history, as well as the future of its 10,000 employees.”
Asiana Airlines is the group’s main subsidiary, accounting for 60 percent of its annual sales. Kumho Industrial is the airline’s largest shareholder with a 33.47 percent stake. Kumho Industrial is controlled by Kumho Buslines, which owns 45.3 percent of its shares.
Asiana Airlines is due to pay 60 billion won in loans by April 25 but is struggling. The airline’s total loans as of late last year stood at 3.44 trillion won, with short-term debt to be repaid within this year totaling 1.32 trillion won.
Some of the possible bidders for the airline include SK Group, Hanwha Group, CJ Group and Aekyung Industry.
SK Group Chairman Chey Tae-won refused to answer reporters when asked about SK’s possible acquisition of Asiana Airlines at the funeral of Hanjin Group Chairman Cho Yang-ho Friday.
But the recruiting in April last year of former Jeju Air CEO Choi Kyu-nam to its Supex Council, SK’s central decision-making body, raises the possibility of SK wanting to enter the airline business.
Hanwha Group develops and manufactures aircraft engines through its subsidiary Hanwha Aerospace. It invested more than 10 billion won in low-cost carrier Aero K Airline but was forced to retract the investment after the government refused to grant the airline a license in 2017.
Conglomerates involved in retail business like Aekyung Industry, which owns Jeju Air, CJ Group and Shinsegae Group are also seen as possible bidders as they could use the airline to expand their distribution networks.
Some analysts forecast private equity funds participating in the bidding, but Asiana’s massive debt will likely stand in the way.
The sale of Asiana puts the fate of its subsidiaries at risk. The airline owns 44.2 percent of Air Busan, 76.2 percent of ICT service company Asiana IDT, 80 percent of travel reservation service provider Asiana Sabre and 100 percent of budget airline Air Seoul, cargo handling operator Asiana Airport and a cargo terminal construction unit Asiana Development.
Creditors are known to prefer to sell off subsidiaries to a single bidder, but industry sources say that could be tough when taking into account the difficulty of the involvement of foreigners in domestic airline management. Korean aviation law prohibits foreigners from managing airlines.
BY JIN MIN-JI, KWAN JAE-MIN [firstname.lastname@example.org]