In Return for Providing Financial Support
The South Korean government announced on April 22 that it would provide liquidity for companies facing a liquidity crisis by raising a fund of 40 trillion won. The liquidity is likely to be provided by company-specific methods such as lending, payment guarantee and investment.
A noteworthy point is that the government set up a system in which it can acquire their shares and return profits to the society after their business goes back to normal.
“Airlines by nature have very high debt ratios and, although they would try to lower the ratios by paid-in capital increase, they will not be able to achieve the purpose given the dire market conditions they are facing now,” the Financial Supervisory Service explained, adding, “In that case, the government will help them lower the ratios and normalize themselves as early as possible by mobilizing its capital capabilities.”
As of the end of last year, Korean Air’s and Asiana Airlines’ debt ratios amounted to 871.5 percent and 1,386.7 percent, respectively. The Financial Supervisory Service is expected to make investments in them to have stock-related rights instead of providing lending to add to their debts. Under the circumstances, some experts are predicting that the government will acquire some shares in the two airlines.