Nashinpyung "Asiana Airlines, Under Credit Rating Watch for Short- and Long-Term Credit Rating Uncertainty"

Upgrade Review → Uncertain Review Grade Monitoring Target
The Longer the Acquisition Process, the Worse the Financial Structure Becomes

[Asia Economy Reporter Minji Lee] NICE Credit Rating announced on the 9th that it has placed Asiana Airlines' long- and short-term credit ratings under a watch for uncertainty through a special review.

On the morning of the 29th, when Asiana Airlines' regular shareholders' meeting was held, shareholders were leaving the meeting room after the meeting at Asiana Airlines in Gangseo-gu, Seoul. Photo by Mun Ho-nam munonam@

Previously, on November 14, 2019, NICE Credit Rating anticipated that if the acquisition by the HDC Hyundai Development Company-Mirae Asset Daewoo consortium proceeded smoothly, the financial structure would improve through a large-scale paid-in capital increase. Accordingly, the company’s long- and short-term credit ratings were assessed at BBB- and A3-, respectively, and placed under an upgrade watch.

Researcher Jeonghyun Lee of the Corporate Evaluation Division 3 said, “In the short to medium term, if the COVID-19 pandemic is not resolved and poor operating performance and further deterioration in financial stability continue, the recovery of the weakened financial fundamentals will not be sufficient even after a large-scale paid-in capital increase following the acquisition completion.” He added, “Considering these factors comprehensively as negative influences on creditworthiness, the ratings have been placed under a watch for uncertainty.”

The company’s consolidated sales for the first quarter were approximately KRW 1.3 trillion, down 25% year-on-year. Fixed cost reductions such as rent and labor costs were limited, resulting in an operating loss of KRW 292 billion. The suspension of passenger flights and increased refund demands led to a deterioration in operating cash flow, increasing borrowing burdens compared to the end of last year. Due to high financial costs and significant foreign exchange losses caused by exchange rate increases, a net loss of KRW 683.3 billion occurred, sharply reducing equity capital.

Moreover, the acquisition process by the HDC Hyundai Development Company-Mirae Asset Daewoo consortium is ongoing, but the timing of the final acquisition completion remains uncertain, which further worsens the financial structure. Researcher Lee stated, “The longer the acquisition process takes, the more the scale of Asiana Airlines’ losses and financial structure will deteriorate.” He added, “Despite capital expansion through the execution of the large-scale paid-in capital increase plan, the recovery of the weakened fundamentals may not be sufficient.”

He continued, “We will closely monitor the progress related to the acquisition process (including corporate merger approval), the scale of the paid-in capital increase and governance after the acquisition, the level of synergy creation linked with the HDC group, and the implementation results of government support policies for the airline industry and the company related to COVID-19, and reflect these in the credit rating.”

This content was produced with the assistance of AI translation services.