The Kumho-Asiana Group has been improving its operation by cutting its debts and restructuring to make up for slow earnings results.

The group cut its borrowings by 1.1 trillion won this year and expects to lower the level of its debt by boosting its capital to improve its capital-to-debt ratio.

Asiana Airlines said it cut its borrowing, which stood 4.57 trillion won at the end of last year, to 3.191,4 trillion won at the end of August, lopping off 865.6 billion won, which is also down 140.6 billion won from borrowings amounting to 3.331,9 trillion won at the end of July.

The airline has been able to secure funds to pay back its debts from its cash flows amounting to 512.2 billion won, the sale of assets and from restructuring, generating 563.4 billion won in cash.

Total borrowing as of the end of August came to 3.971,1 trillion won, just below the 4 trillion won level, showing a reduction of 1.106,8 trillion won compared to the same period last year. The company got 726.7 billion won from its operation and cash of 779.4 billion won for 1.506,1 trillion won in total to pay off debts.

The financial structure of both Kumho-Asiana Group and Asiana Airlines have been improving continuously; the airlines have been taking action to have borrowing cut below the 3.7 trillion won level by the of this year by having affiliates pursue IPOs and the issuances of consol bonds.

Airline officials said they will try to make up for debt with increased earnings by improving cash flows from its operation.
“We will try to boost the credit levels of the airlines so it can borrow more to make its management more smooth,” they said.

The credit rating stands at BBB- now, but it could be improved based on the 3rd quarter results to BBB+ more than a step at least as the last task now for the air carrier is to meet its debt problems with its cash flows only by improving its operation.

The airline plans to boost its capital by 600 billion won in the first half of next year to be ready for any change in its borrowings and debt ratio when the KIFRS accounting standard is enforced in Korea this year.

The group is looking at selling Kumho’s offices in Seoul to bring in 200 billion won for the group, 90 billion won when its affiliates make initial public offerings (IPOs) 220 billion won from the issuances of consol bonds and 10 billion won from the conversion of bonds.

The airline is set to make monthly announcements on its finances, in particular, its borrowings, and communication with the CEO will be wide open to undercut any false rumors on the financials of the group and the airline.

In the meantime, Asiana Airlines said its finances have been improving. Borrowings, which stood at 4.570 trillion won as of the end of last year, have now been cut to 3.191,4 trillion won as of the end of July, down 865.6 billion won in 8 months since.

 
In the first 8 months of this year, the airline earned 512.2 billion won in operating profit and 563.4 billion won in cash from the sale of real estate assets including the Kumho Building in Seoul, with the result that the short-term borrowing fell to 30 percent of all loans from 50 percent, down 20 percent.

A view of Asiana Airlines head office in Kangseo District in Seoul. (Photo: Asiana Airlines)