[Click eStock] "Jin Air Rights Offering Differs from Other Airlines"

Jin Air Has Financial Strength to Endure This Year
"Capital Increase Not to Survive This Year but to Reorganize Next Year"

[Image source=Yonhap News]

[Asia Economy Reporter Minwoo Lee] Jin Air has pushed forward with a paid-in capital increase worth approximately 110 billion KRW. This move is seen as an inevitable choice amid the ongoing lack of signs for recovery in overseas travel demand. However, there is also an interpretation that this capital increase should be viewed differently, as it is aimed at preparing for next year rather than simply adopting a survival strategy like other airlines.

On the 6th, Korea Investment & Securities maintained a 'neutral' investment opinion on Jin Air, citing the continued uncertainty surrounding the recovery of overseas travel demand. Nevertheless, they analyzed that Jin Air’s capital increase has distinguishing features compared to other airlines.

The day before, Jin Air’s board of directors decided on a paid-in capital increase amounting to 109.2 billion KRW. This was deemed unavoidable in order to reorganize amid the high uncertainty caused by the COVID-19 pandemic. Choi Woo-un, a researcher at Korea Investment & Securities, explained, "The decline in overseas travel demand has prolonged as the worst-case scenario initially expected at the start of COVID-19. It is difficult to expect normalization of international passenger demand until 2021, making the capital increase inevitable for Jin Air as well."

The number of shares to be issued corresponds to 50% of the existing common shares, with the planned issue price set at 7,280 KRW per share. This represents a 27% discount compared to the previous day’s closing price. Like other airlines, the process will be conducted through a rights offering to existing shareholders followed by a public offering of unsubscribed shares. The record date for new share allocation is October 16, and the final issue price will be confirmed on October 21. Subscription for existing shareholders will take place from October 26 to 27, and for unsubscribed shares from October 29 to 30, with listing scheduled for November 16.

This capital increase is analyzed as a reorganization for next year, unlike other airlines that are merely trying to maintain the status quo. As of the end of the first quarter, Jin Air’s cash and cash equivalents stood at 186.5 billion KRW, and it is estimated that more than 50 billion KRW was consumed in the second quarter. With over 90% of international flights suspended, the monthly burn rate is estimated to be around 20 billion KRW. Researcher Choi evaluated, "Among airlines facing liquidity crises due to COVID-19, Jin Air was relatively the best at holding on. It had the financial strength to endure through this year."

He added, "While other airlines will need additional fundraising within the year despite their capital increases, Jin Air is expected to be the first to escape financial uncertainty. Now is the time to accelerate reorganization for the post-COVID-19 era, and concerns about the participation of the largest shareholder Hanjin KAL (with a 60% stake) are also limited," he forecasted.

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