Korean Air (KE, Seoul Incheon) parent Hanjin KAL is mulling the sale of three core business units that could net up to KRW3 trillion won (USD2.5 billion) in cash for the company as part of its self-rescue measures, airline and finance sources have told the Korea Economic Daily.
Up for grabs are the carrier’s SKYPASS loyalty programme, inflight catering, and MRO units.
Since the state-owned Korea Development Bank revealed last week that it would inject KRW1.2 trillion (USD1 billion) into the carrier, Korean Air has been under pressure to think of its own cash-generating measures to remedy its liquidity shortage.
The bank has warned that the airline will sustain a cash shortfall of KRW3.8 trillion (USD3.1 billion) this year as the coronavirus pandemic plays havoc with passenger traffic, so it has demanded the disposal of any “sellable” assets.
The inflight food division, worth hundreds of millions of dollars, is likely to be put up for sale first, the sources told the newspaper. When Korean Air resumes normal operations, it is expected to generate steady cash flow.
The air miles loyalty unit, SKYPASS, could fetch billions of dollars as accrued mileage can be sold to credit card companies in return for cash. Examples of airlines that have sold part or all of their mileage businesses are Air Canada, AirAsia, Virgin Australia, and Aeroméxico.
As for the maintenance business, which includes local LCCs among its customers, Korean Air had mulled selling it last year. South Korean conglomerate Hanwha Group and several private equity firms showed interest in it.
