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Liquidity Support Not Enough to Tide Over Korean Air

Korean Air will remain to be in a financially precarious position despite the 1.2 trillion won liquidity support from the South Korean government.

This is due to the 1 trillion won of debt it has to pay within the year out of its total borrowings of 3 trillion won.

It also needs to pay a lease fee of 1.7 trillion won this year, on top of the annual fixed costs of 400 billion won to 500 billion won that it is hard-pressed to cover.

Among the liquidity support it is scheduled to receive from Korea Development Bank (KDB) and the Export-Import Bank of Korea are 200 billion won in operating funds.

The banks will also purchase 700 billion won worth of the airline's asset-backed securities, and 300 billion won worth of its permanent bonds.

Additionally, KDB and the Export-Import Bank will also help the airline refund 200 billion won of maturing corporate bonds worth and acquire 200 billion won of corporate bonds worth, which matures in the second half of 2020.

However, industry analysts say that this support is not enough to help Korean Air last for more than three months.

The good news is that if the coronavirus crisis subsides in the second half, the airline will have an excellent chance to escape from its liquidity crisis.

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