Heavy debt and mounting pressure from creditors has prompted Kumho Asiana Group (KAG) to sell its controlling stake of 33.47 percent in Asiana Airlines, South Korea’s second largest carrier. According to an official of KAG Lee Keun-dong in Seoul, escalating competition on the domestic front and on international routes, and increased operating costs were other factors cited.
“The decision was arrived at after much debate, and it was done with the future of the company and its 10,000 employees in mind,” Lee said, declining further comment. The sale would include Asiana’s low-cost carrier, Air Busan, and two other subsidiaries.
Asiana has nine creditors with state-owned Korean Development Bank (KDB) being its biggest. The airline’s debt has snowballed to $3.03 billion, of which $1.16 billion must be paid by the end of December, spread among several creditors. Another outstanding debt is $52.8 million bonds that are due on April 25.
To meet creditors demands and cope with the debt, the group submitted a proposal to KDB for a $441 million loan, but this was rejected by creditors and the Financial Services Commission (FSC). FSC is South Korea’s top financial regulator. KAG’s 33.47 percent stake is said to be valued at $1.41 billion.
The Aekyung Group which owns South Korea’s biggest LCC Jeju Air and the CJ Group are said to be interested parties in acquiring the stake, either in full or part.
Asiana was established in February 1988 and started operations 10 months later. The airline operates to 14 domestic destinations from Gimpo International Airport and 92 international from Incheon Airport.
It is the majority stakeholder in Air Busan and owns Air Seoul, another LCC. Asiana has long played second fiddle to Korea Air in terms of securing the rights for international routes from the local regulatory body Ministry of Land, Infrastructure and Transport.
The airline operates a fleet of six Airbus A380s, seven A350-900s, six 767-300s, 16 A330-300s, 20 A321s, seven A320s, two Boeing 747-400s, nine 777-200ERs, eleven 747-400Fs, and one 767-300F.