Asiana Airlines' 'Plan B'... 'Restructuring, Spin-off Sale, Shareholder Capital Reduction'

2.4 Trillion Won Draft Fund Injected... KDB and KEXIM Convert Perpetual Bonds to Stocks
"Business and Workforce Restructuring Inevitable... Subsidiary Sale Under Review"
Need Raised to Reduce Kumho Industrial's Stake in Asiana Airlines

[Asia Economy Reporter Jo Gang-wook] The sale of Asiana Airlines, which has been dragging on for over 10 months, was finally canceled on the 11th, drawing increased attention to the 'Plan B' prepared by the creditors. The Korea Development Bank (KDB) raised the possibility of workforce and organizational restructuring as well as the separate sale of subsidiaries such as Air Seoul and Air Busan during an online briefing Q&A session the previous day.

According to financial sources on the 12th, Choi Dae-hyun, Vice President of KDB’s Corporate Finance Division, said, "If necessary, various sale parts including Air Seoul, Air Busan, and resorts including golf courses should be considered within the scope of consulting."

The creditors plan to stabilize Asiana Airlines’ management first and then proceed with resale. KDB believes that once the COVID-19 pandemic subsides and the aviation industry normalizes, Asiana Airlines will be an attractive asset in the M&A market.

Possibility of Separate Sales of Air Busan and Air Seoul Instead of a Block Sale

However, unlike the current attempt to sell Asiana Airlines headquarters and its six subsidiaries as a block sale, the possibility of separate sales is higher in the resale.

Asiana Airlines currently owns six subsidiaries, including low-cost carriers (LCCs) Air Busan and Air Seoul, IT affiliate Asiana IDT, reservation and ticketing company Asiana Sabre, and Kumho Resort.

Among the subsidiaries, Air Busan has been consistently mentioned as the most likely candidate for sale. Unlike Air Seoul, which is a wholly owned subsidiary, Asiana Airlines holds only 55% of Air Busan’s shares, making the sale process relatively easier.

Consideration of Kumho Industrial’s Share Capital Reduction... Decision Based on Year-End Financial Status

The possibility of a capital reduction by existing shareholders is also being discussed. Within the creditors, there is a certain consensus on the need to reduce the shares of Asiana Airlines held by the major shareholder, Kumho Industrial. Kumho Industrial, however, denies this, arguing that the case differs from past restructuring examples and Asiana Airlines.

Regarding this, Vice President Choi said, "Whether to reduce existing shareholders’ capital will be reviewed depending on the company’s year-end financial status and the creditors’ management situation," adding, "The management situation will likely hinge on securing management control shares through the conversion of perpetual bonds, and it will be comprehensively judged depending on whether M&A efforts are re-pursued."

Restructuring Inevitable... Route Adjustments, Cost Reduction, Organizational Reorganization

Restructuring through the sale of idle assets and route reductions is inevitable. Since early this year, Asiana Airlines has been implementing voluntary measures such as employee rotation leave, paid leave, and executive salary returns and cuts, expecting to achieve about 180 billion KRW in labor cost savings by the end of next month. However, large-scale restructuring is not expected immediately. The creditors plan to inject funds from the Industrial Stabilization Fund to normalize Asiana Airlines’ management, but the fund requires maintaining over 90% of total employment.

Vice President Choi said, "Since the Industrial Stabilization Fund is being supported, and considering the current flight status and salary return status, the workforce issue does not seem urgent, so it will be considered depending on timing and methods," adding, "Additional self-help plans will likely be divided into three categories based on external consulting results: route adjustments, internal cost reductions, and organizational restructuring, all of which require careful examination over a considerable period."

The creditors are concerned about a downgrade in Asiana Airlines’ credit rating. A downgrade could trigger immediate repayment demands or cross-defaults from multiple creditors.

Vice President Choi emphasized, "We plan to establish and implement a post-COVID corporate value enhancement plan through liquidity from the Industrial Stabilization Fund and capital expansion," adding, "If conditions permit, we will promptly pursue resale to a responsible and capable management entity and make every effort to normalize the company."

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