Asiana Airlines’ (Asiana) revised recovery plan by its nine creditors, led by Korea Development Bank (KDB), will involve the restructuring of its network and eliminating unprofitable routes before the airline is sold in December. The sale, which is expected to reduce liquidity risks, will include Asiana’s two subsidiary low-cost carriers (LCCs), Air Busan and Air Seoul. Asiana holds a 44.2 percent stake in Air Busan and owns the latter outright.
According to an official at Kumho Asiana Group (KAG), Lee Keun-dong, a detailed analysis of the airline’s network including revenue derived from each route will be carried out before a decision is made on the routes to be axed. Asiana currently has a network of 14 domestic and 90 international destinations.
KAG holds a 33.47 percent controlling stake in Asiana, South Korea’s second-largest airline. The stake is said to be valued at $1.41 billion but the sale price could be higher.
Because Korea is a conservative country, only local companies with deep pockets will be allowed to bid. The Aekyung Group, which owns Jeju Air, the country’s biggest LCC, is seen as a financially strong contender to take over Asiana.
The government, through state-owned KDB, has agreed to inject $1.4 billion to provide a lifeline for debt-riddled Asiana to enable it to honor its immediate financial obligations. This financing will help the carrier settle its $52.8 million debt, for which payment is due tomorrow, while the remainder will be used to meet other obligations that are due this year.
In early March, Park Sam-koo agreed to resign as CEO and chairman of Asiana and KAG after 17 years so as not to become involved in the carrier’s day-to-day operations.
Park also agreed to sell Asiana after the airline’s creditors and the Financial Services Commission, South Korea’s top financial regulator, approved the carrier’s revised recovery plan.
Park recently apologized to employees in Seoul for the financial situation of Asiana, adding that he resigned in the interest of the company and its future.
Asiana was established in February 1988 and started operations 10 months later.