The Korea Herald


Desperate Kumho Asiana decides to sell flagship carrier

By Kim Da-sol

Published : April 15, 2019 - 17:45

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Under a mountain of debt and pressure from creditors, Kumho Asiana Group’s board of directors decided Monday to sell its core unit Asiana Airlines, a day after the creditors rejected its latest self-rescue proposal amid a snowballing liquidity crisis.

“For normalization of Asiana Airlines, we considered the best option and decided that its sell-off will recover trust in the group and the airline,” the group said in a statement. 

“The sale of Asiana -- with 31-year-long history -- is also for the sake of the future development of the company, as well as for some 10,000 employees,” it said, adding that the group will proceed with the sale process. 

(Yonhap) (Yonhap)

Without Asiana, the group will be left with construction firm Kumho Industrial, Kumho Buslines and Kumho Resort. The group would fall from its position as the seventh-largest conglomerate to around 60th.

Currently, former Chairman Park Sam-koo holds a 45.3 percent stake in Kumho Buslines, which has a 33.47 percent stake in the air carrier. Kumho Buslines owns Kumho Industrial. 

Following the group’s decision, Financial Services Commission Chairman Choi Jong-ku said, “Kumho’s decision to save the company is positive,” though it may take some time for a deal to be reached. 

While market insiders say the acquisition price for Asiana will be at least 1.6 trillion won, it could go up depending on the number of buyers and sale of the aviation license and flight route premium.

SK Group and Hanwha Group have been mentioned as potential buyers. Both have shown interest in the air carrier business and are actively seeking business expansion through mergers and acquisitions.

Asiana Airlines employees voiced hope for the company’s improved financial status and normalization of management.

“It is undeniable that the parent company was not able to support Asiana Airlines due to deteriorating sales, although the air carrier had and still has a lot of potential. I hope the sell-off does not change too many things though,” an Asiana Airlines official told The Korea Herald. 

Beginning as a taxi service in Gwangju in 1946 by founder Park In-chon, the airline-to-terminal conglomerate had risen as one of the nation’s top 10 conglomerates, with Asiana accounting for more than 60 percent of its total sales.

The air carrier reported a record-high 7.1 trillion won in sales last year, but its operating profit came to 28.2 billion won with net loss of 195.9 billion won. Kumho Asiana has debt of 3.2 trillion won, with 1.2 trillion won due this year.

Market insiders said that Kumho Asiana Group was hit hard by a liquidity crunch from the takeover of Daewoo Engineering & Construction in 2006. Four years later, the Korea Development Bank purchased Daewoo Engineering to help the debt-ridden parent group restructure its finances.

But the group continued to suffer from a liquidity crisis. It acquired logistics delivery company Daehan Toongwoon, which is now CJ Logistics, in 2008 and sold it back in 2011. It eventually sold other major subsidiaries including Kumho Life Insurance, which is now KDB Life Insurance, and Kumho Tire, to secure more cash.

Although the group reshaped its financial structure by successfully buying back Kumho Industrial in 2015, it soon faced hurdles, as creditors rejected Park and his son Se-chang from mobilizing subsidiaries or other third parties to keep Kumho Tire. This was already after Park and his family had spent tens of billions of won to increase their shares in Kumho Industrial and other group units. Kumho Tire was eventually bought by China’s Double Star in 2018.

Park Sam-koo (Kumho Asiana) Park Sam-koo (Kumho Asiana)

Last week, Kumho Asiana asked its main creditor, the state-run KDB, for an additional 500 billion won in financial help. As part of its self-rescue measures, the group promised to sell off Asiana if it fails to meet creditors’ demands in three years. It also offered the private assets of former Chairman Park and some of his family members as collateral.

But the creditors and Financial Services Commission rejected the proposal, citing the group’s lack of ability to regain market trust and criticizing the owner family for “attempting to buy time.”

Instead, FSC Chairman Choi Jong-ku and creditors urged the group’s founding family to sell their personal assets and submit a plan to raise funds through a rights issue. 

Meanwhile, shares in Asiana Airlines soared 30 percent to 7,280 won, the highest in more than three years, following the decision. Kumho Asiana Group’s affiliates Air Busan, Asiana IDT and Kumho Industrial shares increased 29.9 percent (9,070 won), 29.7 percent (23,100 won) and 29.6 percent (15,100 won), respectively. 

By Kim Da-sol (