Asiana Airlines receives lifeline from KDB and Eximbank

State-run banks are providing more than $1 billion of emergency funding to Asiana Airlines as the carrier’s business collapses as a result of the pandemic.

The Korea Development Bank (KDB) and the Export-Import Bank of Korea (Eximbank) on Tuesday said they would be lending 1.7 trillion won ($1.52 billion) to the airline.

The state-owned banks agreed to the financing at a meeting held to arrange support for the debt-laden airline. Asiana Airlines will hold a board meeting today to vote on the package.

Last year, the KDB and Eximbank committed 1.6 trillion won to the airline. They acquired 500 billion won worth of the carrier’s perpetual bonds and provided an 800 billion won credit line and 300 billion won of credit guarantees.

The airline recently increased the limit on its credit line with the state lenders by 300 billion won to refinance maturing debt and secure operation funds.

In December, an HDC Hyundai Development-Mirae Asset Daewoo consortium signed a deal to acquire Asiana Airlines. The value of the airline has plummeted more than 20 percent since then.

HDC was scheduled to complete the purchase of Kumho Industrial’s 31 percent stake and newly-issued shares in April. Some of the proceeds from the new share issue were to be used to pay down 1.17 trillion won in loans from the two state banks.

HDC and Asiana Airlines agreed to postpone the payment because of the delays in getting government approvals for the acquisition from regulators in six countries.

While five - the United States, China, Kazakhstan, Uzbekistan and Turkey - approved the acquisition, Russia has yet to make its decision.

Asiana Airlines on Tuesday couldn’t confirm how it will spend the new funds. The airline is expected to make an announcement with regard to the financial support today.

Airlines in the United States and Europe have received significant support from their governments, but the Korean government has focused mostly on budget carriers, including a maximum 300 billion won in financial aid and fee reductions.

In 2017, Asiana Airlines generated 6.5 trillion won in revenue and 245.6 billion won in operating profit. The following year, revenue hit 7.2 trillion won while operating profit shrunk to 28.2 billion won.

In 2019, revenue retreated to 6.97 trillion won, and the airline reported a 44.4 billion won operating loss as it battled with discount carriers and as Japan traffic fell due to tensions between Korea and Japan.

The situation is expected to be worse this year.

In March alone, passengers traveling on Korean airlines dropped an estimated 91.5 percent compared to the same period a year earlier to 648,000. Asiana’s passenger numbers dropped 88.1 percent to 135,000.

The airline on Sunday said that it was extending the furlough of employees indefinitely. Some 8,000 workers are required to take a minimum of 15 days of unpaid leave in May and every subsequent month.

BY JIN MIN-JI [minji@joongang.co.kr]