SEOUL -- State-backed lenders in South Korea will extend 2.9 trillion won ($2.35 billion) in aid for Korean Air Lines and Asiana Airlines to keep the major carriers aloft and safeguard jobs as the pandemic decimates travel demand.
The assistance from the Korea Development Bank and the Export-Import Bank of Korea is also aimed at keeping the nation's transportation infrastructure intact.
Korean Air stands to receive 1.2 trillion won under measures announced Friday. Such steps as new lending and the proceeds from selling convertible bonds will secure liquidity ahead of the May 15 repayment date for existing borrowings. If the state-owned lenders convert the bonds into stock, they will acquire a 10.8% stake in the market leader.
Asiana Airlines will obtain 1.7 trillion won in lending from the two banks to help fast-track its sale to construction group HDC Hyundai Development, a deal in the making since before the coronavirus outbreak.
Korean Air and Asiana have relied heavily on international demand considering the relatively compact size of South Korea. But with the pandemic driving countries to restrict inbound travel, the two carriers slashed 90% of their flights. They have furloughed most of their workers but are still weighed down by aircraft lease payments and other overhead.
A total of 40 trillion won in relief was announced by the government Wednesday for seven key industries. Korean Air, which has already received funds to pay the idled workers, seems confident that it will survive the crisis with the aid. Assistance for low-cost carriers has also been drawn up by the Korea Development Bank.