Yesterday, South Korea’s second largest airline, Asiana Airlines, applied for a second daily service between Seoul Incheon and JFK.
Despite our reporting in April of this year Asiana’s intention to cut routes amid financial woes, the airline yesterday announced its application for a second daily service to the US. The new route, says Routes Online, will operate at night. It will be flown by an Airbus A350-900.
The carrier hopes to begin the second service from the 24th November this year.
In early 2019, auditors voiced concerns about Asiana’s financial statements. Details of the airline’s debts and the value of its equity were not immediately apparent to assessors. As a consequence, they could not properly evaluate the company’s health and stability.
The resulting financial hiccup led to the airline’s reporting “steeper losses and bigger debts, triggering warnings of credit-rating downgrades,” according to Reuters. The company even looked set for a rapid down turn when one of the airline’s bosses Park Sam-koo voluntarily resigned. Apparently, he admitted responsibility for the indiscretions.
Amid the concerns about its future, Asiana set about discontinuing several of its less profitable routes. At the end of April it closed reservations on the Seoul Incheon to Chicago O’Hare route for travel after the 27th October. The route was serviced five times a week with a B777-200ER.
Then came closure of the Seoul Incheon – Delhi route. This again was serviced five times a week. Reservations after the 7th of July have ceased. The route was operated with an A330-300.
Most recently, on the 10th June, the airline announced its July cessation of two Russia Far East routes to Khabarovsk and Yuzhno-Sakhalinsk. The routes were serviced three times a week by an A321.
That being said, the problems that beset the company in April seem to have been temporarily resolved. We learned that South Korean creditors agreed to provide in the region of $1.4Bn-worth of aid to the cash-strapped company. That went some way to bolstering, in the short-term at least, the liquidity of the airline.
However, in tandem with its receiving a bail out, the airline’s parent company Kumho Asiana was urged to sell its 33.5% stake in Asiana Airlines. Reuters added that Asiana Airlines’ biggest shareholder would “do its utmost” to sell off its shares, but was reluctant to do so.
In the clear?
It is tempting to believe that the doubling of its routes to JFK and a smattering of other additions to an already emaciated manifest hint at an Asiana recovery. However, the moves are likely to have been made only in response to a concerted effort by Kumho Asiana Group to have the airline as streamlined as possible prior to sale.
On June 27th, The Investor reported that the South Korean conglomerate will finally begin the process of selling Asiana Airlines in July as “part of its broad restructuring efforts.” Boss of the airline, Han Chang-soo, announced that, “the group will give the public bidding notice (for Asiana) next month.”
As is often the case, confirmation of the sale of parent stock prompts spikes in shares of affiliate companies. Kumho’s vast network of businesses includes those concerned with the automotive and petrochemical industries. Some of them are sure to benefit from the announcement.
In terms of who will buy the majority stake of Asiana, the jury is out. Potential buyers include Hanwha Group and CJ Group. Interestingly, Korean Air Chairman Cho Won-tae said his company “is looking at the deal.”