Budget carriers scurrying to raise funds amid extended pandemic
South Korea's low-cost carriers are planning to raise funds through a capital increase to ride out the prolonged coronavirus pandemic and put them in a better financial position, industry sources said Monday.
Budget carriers have suffered the most since early last year due to the COVID-19 pandemic and have been struggling to raise their capital bases as business performance does not show signs of improvement in the face of the prolonged pandemic.
Jeju Air Co., the country's biggest budget carrier, plans to carry out a 5:1 capital reduction as its capital erosion rate reached 29 percent in the first quarter.
Then, it will decide on the plan to raise 200 billion won (US$17.4 million) via stock offerings next month and use the proceeds as operating capital, the company said in a regulatory filing.
"We are preemptively taking measures (such as share sale) to avoid a worst case scenario in the case of an extended pandemic throughout the year and widened net losses for the year," a budget carrier official said.
Air Busan Co., whose capital erosion rate stood at 34 percent in the first quarter, said it will issue new shares worth 250 billion won in October.
Air Busan and Air Seoul Inc., LCC units of Asiana Airlines Inc., have already received 80 billion won and 30 billion won in financial aid from their parent Asiana this year.
Jin Air Co., the LCC unit of national flag carrier Korean Air Lines Co., said it is considering a possible rights offering and other measures to secure funds. Its capital erosion rate was 42 percent in the first quarter.
T'way Air was quick to secure 80 billion won through a share sale in April as its debt-to-equity ratio reached 886 percent at the end of March, jumping from 503 percent at the end of December.
Source: Yonhap News Agency