40 Trillion Won Scale Ki-An Fund Uselessness Theory... Only 2 Support Cases in Half a Year

Jeju Air Support Plan Confirmed by End of Month
Support Amount Drastically Reduced to 30 Billion Won
Asiana Also Limited to 240 Billion Won Support
Korean Air Unlikely to Apply for M&A

[Asia Economy Reporter Kangwook Cho] The Industrial Stabilization Fund, ambitiously launched with a scale of 40 trillion won, is expected to support only two companies, Asiana Airlines and Jeju Air. Korean Air is unlikely to apply for the fund in relation to the Korea Development Bank's direct support to Hanjin KAL and the acquisition of Asiana Airlines through a rights offering. Because of this, some are raising a 'uselessness theory' about the fund, which has shown a meager performance of supporting only two companies in six months since its launch amid corporate indifference. Given this situation, voices calling for resolving the structural problems of the fund first are growing even within the organization.

Industrial Stabilization Fund to Finalize Jeju Air Support Plan Within This Month

According to the financial sector on the 7th, the Industrial Stabilization Fund Operation Deliberation Committee plans to hold two meetings on the 10th and 30th to finalize the support plan for Jeju Air.

An official from the Industrial Stabilization Fund said, "Although Jeju Air has not officially applied for fund support yet, it is nearing a conclusion through prior consultations," adding, "Considering Jeju Air's financial situation, the support plan will be finalized within this year."

However, the fund's support amount is expected to be significantly reduced to around 30 billion won from the initially anticipated amount. Currently, Jeju Air needs about 200 billion won. The government plans for the Korea Development Bank and the Export-Import Bank to provide 140 billion won, and the Korea Credit Guarantee Fund to inject 30 billion won through a securitization company guarantee (P-CBO). The Industrial Stabilization Fund will then support the remaining amount.

Asiana 240 Billion Won, Jeju Air 30 Billion Won... Minimal Utilization of Industrial Stabilization Fund

The utilization of the fund by Asiana Airlines, the first company to receive support from the Industrial Stabilization Fund, is also low. After the 'no deal' with HDC Hyundai Development Company, Asiana Airlines was approved for 2.4 trillion won from the fund. Of this, Asiana Airlines has reportedly used about 240 billion won so far.

Arithmetically, the amount used by the two companies from the 40 trillion won fund is only 0.675%, or 270 billion won. Even if Asiana Airlines were to use the full 2.4 trillion won, it would amount to only 6.075% utilization. However, the situation changed as Asiana Airlines' recovery was decided through corporate integration rather than independent rehabilitation. Korean Air, which is pursuing the acquisition of Asiana Airlines, is also unlikely to apply for the fund. This is because there could be criticism that the fund, intended as emergency support to overcome liquidity crises, is being used for mergers and acquisitions (M&A).

An official said, "The situation changed as Korean Air's acquisition of Asiana Airlines progressed," adding, "Since the fund supports as a creditor, using this money for M&A would cause problems." He continued, "It might be the reason Korean Air has not applied for the fund so far, as this matter was ongoing."

Calls for Industrial Stabilization Fund's Uselessness and Fundamental Structural Reform

As the utilization of the fund remains low, voices calling for its uselessness and fundamental structural reform are growing. From the companies' perspective, high interest rates and the condition to maintain over 90% employment for six months are cited as the biggest obstacles.

Another official familiar with the fund's situation said, "In reality, businesspeople say, 'Who would want to use that money (the fund)?'" He added, "Extremely speaking, they say it is better to have unpaid leave than to borrow money to support 90% of employees." He also pointed out, "The problem is that the government failed to anticipate the prolonged possibility of the COVID-19 pandemic," emphasizing, "It's not about abolishing the fund, but the government needs to reset the structural framework from a broader perspective."

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