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ITSTours
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Asiana Airlines News and Discussion Thread

Mon Mar 25, 2019 7:37 am

I don't see much Western media attention except these from Reuters and FlightGlobal and these don't go into details.
https://www.reuters.com/article/us-asia ... SKCN1R308H
https://www.flightglobal.com/news/artic ... ng-456831/
https://www.youtube.com/watch?v=BgdBBLIdTiM

So what's up?

1) Asiana's auditor Samil PwC released "qualified opinion - or statement addressing an incomplete audit". "Qualified" means "limited" here.
Samil suggested that "the company might have provided limited financial information."
This is due to Samil disagreeing with Asiana for how much Asiana allow liabilities for operating-leased aircraft repair and earnings from mileage, whether to include Air Busan in the consolidated statement, etc.
Samil even questions Asiana's ability to "going concern," or continuous operation.
Asiana said these opinions are not related to the operation or cash flow and will be resolved soon.
2) Because of this, the trading has been suspended and resume on March 26th. I can see the stock diving on Tuesday.
3) The 52.9 million USD corporate bond for Asiana has been delisted.
4) Credit rating agencies consider lowering Asiana's rating from BBB-, which is the lowest investment grade.

These are what have happened or are happening. So they're in huge trouble, but they're not going to bankrupt or suspend operation soon.

But...

5) If any of three credit agencies rate Asiana as BB+ (non-investment grade), the prepayment requirement for asset-backed security (ABS) triggers and Asiana should pay 1 billion USD back to the investors. Or Asiana cannot take any cash earned from the operation until they pay back the ABS.

6) Asiana already has 7 times more debt than its assets (even more with the IFRS standard change). $1B liabilities will surely make default risk imminent.

7) I don't know if they will actually go default, and what will happen next. The government may step in, and/or other companies may try to acquire Asiana.
Last edited by SQ22 on Sat Aug 01, 2020 9:16 am, edited 2 times in total.
Reason: Title updated
 
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c933103
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Re: Asiana Airlines in huge financial trouble

Mon Mar 25, 2019 8:46 am

Seems like a major reason why they have such a high debt ratio is the new accounting rule where any properties the company leased are treated as debt of the company (as in the obligation to pay for them?), and the change is particularly significant for Asiana because majority of their aircraft are leased
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ITSTours
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Re: Asiana Airlines in huge financial trouble

Mon Mar 25, 2019 8:59 am

c933103 wrote:
Seems like a major reason why they have such a high debt ratio is the new accounting rule where any properties the company leased are treated as debt of the company (as in the obligation to pay for them?), and the change is particularly significant for Asiana because majority of their aircraft are leased


Yes but no. IFRS standard change will be applied from Financial Year 2019, which means the current debt ratio does not reflect the operating-leased aircraft.

So from this year, the debt ratio will increase even further.
 
juliuswong
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Re: Asiana Airlines in huge financial trouble

Mon Mar 25, 2019 2:02 pm

They belong to one of South Korea largest conglomerate Kumho Group. I don't see how they will collapse, as OP has mentioned it is too big to fail. Not forgetting they have many subsidiaries including, not limited to, Air Busan and Air Seoul.
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ITSTours
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Re: Asiana Airlines in huge financial trouble

Mon Mar 25, 2019 8:41 pm

Bloomberg summarized the news better than I did.
https://www.bloomberg.com/news/articles ... ge-of-junk
 
HeeseokKoo
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Re: Asiana Airlines in huge financial trouble

Mon Mar 25, 2019 11:32 pm

I don't think this is the company's first hiccup, and certainly won't be the last. Asiana has been in the borderline bankrupt on the paper for the number of years but it still manages to operate fine and is still loved by passengers.
 
Galvan316
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Re: Asiana Airlines in huge financial trouble

Tue Mar 26, 2019 7:14 pm

Could KE look to buy up some of Asiana?
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SteelChair
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Re: Asiana Airlines in huge financial trouble

Tue Mar 26, 2019 7:35 pm

More 380s looking for a home.
 
GuruJanitor
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 1:44 pm

Asiana's CEO and co-CEO of Kumho resigned earlier today, which sent stock price soaring 15% initially. https://www.nasdaq.com/article/asiana-a ... 0328-00046

Also worth noting:
It said it will launch an "emergency management committee headed by vice chairman of the group to normalise our management in a short period of time and will hire a respectable person outside the company as the new chairman."

KDB said in a statement on Thursday that it planned to work with the airline to improve its financial structure.


KDB plans on helping Asiana and Kumho readjust their financial structure.
 
jeffrey0032j
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 1:58 pm

SteelChair wrote:
More 380s looking for a home.

Tarbes seems to be a good place for them to live in.
 
SCQ83
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 2:16 pm

I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.
 
filipinoavgeek
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 2:52 pm

SCQ83 wrote:
I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.


You're also forgetting Korean Air's own LCC Jin Air, which appears to have developed a sizable following as well. Plus remember that Air Seoul (and Air Busan) are both owned by Asiana (or at least Kumho).
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jbs2886
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 2:59 pm

SCQ83 wrote:
I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.


What is your basis for asserting there is no room for two legacy carriers? These two carriers have co-existed for quite some time. Its a country of over 50M and relatively wealthy. Moreover, its served as a significant connecting hub for China and, to some extent, Japan.
 
SeoulIncheon
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 3:39 pm

juliuswong wrote:
They belong to one of South Korea largest conglomerate Kumho Group. I don't see how they will collapse, as OP has mentioned it is too big to fail. Not forgetting they have many subsidiaries including, not limited to, Air Busan and Air Seoul.


Actually Kumho Group has been in very bad shape recently. I see Asiana financial trouble becoming the last straw that fells Kumho Group... Asiana Airlines and Kumho Tires are the only two companies that is worth something at this point.
 
SeoulIncheon
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 3:45 pm

jbs2886 wrote:
SCQ83 wrote:
I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.


What is your basis for asserting there is no room for two legacy carriers? These two carriers have co-existed for quite some time. Its a country of over 50M and relatively wealthy. Moreover, its served as a significant connecting hub for China and, to some extent, Japan.


Korean market was basically duopoly for quite some time. No LCC and not many carriers outside Korea. In 2000, Korean market was really only KE/OZ with no LCC at all. Since then we now have 3 LCCs(excluding KE/OZ subsidiaries) + more than two dozen foreign carriers that fly to Korea. There is really no room for two legacy carriers in Korea.

Also note that Korea is much, much smaller market than UK, Germany, Netherlands, France which all only have one legacy carrier.
 
jbs2886
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 3:46 pm

SeoulIncheon wrote:
juliuswong wrote:
They belong to one of South Korea largest conglomerate Kumho Group. I don't see how they will collapse, as OP has mentioned it is too big to fail. Not forgetting they have many subsidiaries including, not limited to, Air Busan and Air Seoul.


Actually Kumho Group has been in very bad shape recently. I see Asiana financial trouble becoming the last straw that fells Kumho Group... Asiana Airlines and Kumho Tires are the only two companies that is worth something at this point.


Apparently Kumho Tires was split off? https://en.wikipedia.org/wiki/Kumho_Tire (I know, Wikipedia).
 
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LAXintl
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 3:51 pm

Funny both OZ and KE lose their top executive same week.
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SCQ83
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 3:51 pm

SeoulIncheon wrote:
jbs2886 wrote:
SCQ83 wrote:
I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.


What is your basis for asserting there is no room for two legacy carriers? These two carriers have co-existed for quite some time. Its a country of over 50M and relatively wealthy. Moreover, its served as a significant connecting hub for China and, to some extent, Japan.


Korean market was basically duopoly for quite some time. No LCC and not many carriers outside Korea. In 2000, Korean market was really only KE/OZ with no LCC at all. Since then we now have 3 LCCs(excluding KE/OZ subsidiaries) + more than two dozen foreign carriers that fly to Korea. There is really no room for two legacy carriers in Korea.

Also note that Korea is much, much smaller market than UK, Germany, Netherlands, France which all only have one legacy carrier.


That was exactly my point.

At this stage multiple legacies are only sustainable in large countries like China or the US.

Corporate traffic will end up in the major legacy (Korean Air) and leisure / holiday in the low costs.

There is no room for the Asianas, Transaero, Air Berlin or BMI of this world.
 
Delta28L
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 3:53 pm

Time to turn Korean Air into the full service carrier and Asiana the LCC of the country. Get rid of all the other LCC subsidiaries and the market will balance itself out.
 
zakuivcustom
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 4:48 pm

Delta28L wrote:
Time to turn Korean Air into the full service carrier and Asiana the LCC of the country. Get rid of all the other LCC subsidiaries and the market will balance itself out.


And tell me how one is suppose to do that?

SeoulIncheon wrote:
Korean market was basically duopoly for quite some time. No LCC and not many carriers outside Korea. In 2000, Korean market was really only KE/OZ with no LCC at all. Since then we now have 3 LCCs(excluding KE/OZ subsidiaries) + more than two dozen foreign carriers that fly to Korea. There is really no room for two legacy carriers in Korea.

Also note that Korea is much, much smaller market than UK, Germany, Netherlands, France which all only have one legacy carrier.


Another thing to add about South Korean aviation market in general - with KTX nowaday (Gyeongbu to Busan in 2010, Honam in 2015) the domestic market is more or less GMP-CJU and CJU-Random airports in "mainland" South Korea. GMP-PUS is still decent, but is just nowhere near what it was (Actually OZ doesn't even fly that route themselves, they just codeshare with BX).

Ultimately...
http://www.businesskorea.co.kr/news/art ... dxno=30278

High Aircraft Lease Cost being a problem...sounds familiar?
 
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c933103
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 4:55 pm

SCQ83 wrote:
I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.

And a new "hybrid service carrier" will soon enter the Korean market next year.
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Cunard
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 5:11 pm

Delta28L wrote:
Time to turn Korean Air into the full service carrier and Asiana the LCC of the country. Get rid of all the other LCC subsidiaries and the market will balance itself out.


You sir win the award for the most ridiculous post on this thread, well done you totally deserve the award!
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Polot
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 5:14 pm

Delta28L wrote:
Time to turn Korean Air into the full service carrier and Asiana the LCC of the country. Get rid of all the other LCC subsidiaries and the market will balance itself out.

Why get rid of all the other LCCs? Why don’t we just get rid of Asiana? That sounds easier to me than getting rid of multiple existing LCCs and transforming an existing premium carrier.

Sounds like the market is already starting to balance itself out if Asiana is truely in deep trouble.
 
zakuivcustom
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 5:23 pm

c933103 wrote:
And a new "hybrid service carrier" will soon enter the Korean market next year.


That I totally forgot about also, until I saw the Air Premia thread back on Page 1. :D

Actually, perhaps Air Premia can replace Asiana as South Korea's 2nd longer-haul carrier?
 
LAXLHR
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 5:32 pm

filipinoavgeek wrote:
SCQ83 wrote:
I am not very familiar with South Korea, but isn't it what has happened in other countries like Germany or the UK?

South Korea is a medium-sized market, with no room for two legacy carriers (Korean and Asiana). With the boom in low cost carriers (Air Seoul, Jeju Air, Eastar) on one side and Korean on the other, there is simply no room for it.


You're also forgetting Korean Air's own LCC Jin Air, which appears to have developed a sizable following as well. Plus remember that Air Seoul (and Air Busan) are both owned by Asiana (or at least Kumho).


Exactly! You should have stopped at "I am not very familiar with South Korea" ....edited to "NOT FAMILIAR AT ALL"!! ;-). smh
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EBiafore99
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 6:03 pm

ITSTours wrote:
Bloomberg summarized the news better than I did.
https://www.bloomberg.com/news/articles ... ge-of-junk


Most interesting part of the article:
Asiana will seek another audit as soon as possible to get an “unqualified” opinion, a spokesperson said Monday.

I just can't figure out why Asiana essentially be so blunt that they are opinion shopping and believe that even an unqualified opinion later on would negate the qualified opinion. We accountants are typically pretty cautious people, so for a qualified opinion to come out, that's a BIG deal that I don't see any reputable accounting firm wanting to touch.
 
ITSTours
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 6:12 pm

EBiafore99 wrote:
ITSTours wrote:
Bloomberg summarized the news better than I did.
https://www.bloomberg.com/news/articles ... ge-of-junk


Most interesting part of the article:
Asiana will seek another audit as soon as possible to get an “unqualified” opinion, a spokesperson said Monday.

I just can't figure out why Asiana essentially be so blunt that they are opinion shopping and believe that even an unqualified opinion later on would negate the qualified opinion. We accountants are typically pretty cautious people, so for a qualified opinion to come out, that's a BIG deal that I don't see any reputable accounting firm wanting to touch.


They got the unqualified opinion from the Samil PwC on 26th already.
But Asiana's operating and net income got slashed so much. Operating income went straight from black to red. How much cooking they did before the audit?
 
ITSTours
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 6:19 pm

Analogy of BMI or Air Berlin does not work for Asiana when South Korea does not have a European Single Aviation Market.
SK doesn't even have open skies with China the largest neighbor.
Korean LCCs cannot fly Europe because 1) they do not have traffic rights to important markets (London, Paris, Frankfurt, Rome, etc.) and 2) they do not own Siberian overflight right in addition to the need of widebodies.
North America and Oceania are too far so they need widebodies which only Jin Air owns (and they got them from KE obviously.) While we have an open skies with US and Canada, Australian market is also restricted for SYD/MEL/BNE/PER (or the biggest cities), so Jin Air could only fly CNS and OOL.
Even in SE Asia, the two important markets SIN and CGK are restricted, so Jin Air only could fly Johor and Kuala Lumpur. The yields are of course much lower.

So there is currently a big barrier of entry especially for longhaul markets and that is why Korea can sustain two FSCs. (Taiwan with a smaller population and economy size will have three soon!) Let us see when Air Premia comes into the market and how Asiana and Air Premia perform.

But generally speaking Asiana is benefitting much from restricted market entries and lack of the open skies (as with any other cases). Also it is usually not the Korean government restricting it, but the other side, for example, Singapore and France. And these will not be resolved soon. Open skies with China, Singapore or EU will not happen in the near future. (Indonesia might be different I guess but it has the lowest yield/demand among them) So Asiana will have a viable business case for a while.

The question is that, if Asiana has enough funds and cash to operate, and it clearly does not, mainly because the chairman Park (who just has resigned) literally threw trillions of Wons into garbage to acquire Daewoo Construction and Korea Express (now CJ Logistics) and all these M&As had failed.
Last edited by ITSTours on Thu Mar 28, 2019 6:42 pm, edited 2 times in total.
 
smartplane
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 6:38 pm

zakuivcustom wrote:
Ultimately...
http://www.businesskorea.co.kr/news/art ... dxno=30278

High Aircraft Lease Cost being a problem...sounds familiar?

Leasing or purchasing new aircraft will always, in the books, appear to be more costly than using your old, owned fleet.

That's because older aircraft will have lower utilisation, are less likely to have engine and air frame service contracts, and no end of lease payments (leasing only) to make (some leasing companies, especially where high country and / or customer credit risk, add EOL to monthly lease payments, so no / minimal EOL to pay at end of lease).

Both air frame and engine OEM's are extracting more and more lifetime revenue from mid-size and smaller owners and operators, who are unable to resist (negotiate). In a decade, when the split between mega and smaller is even more pronounced, the OEM's will be complaining about market domination. It's their tactics that are partially responsible.
 
zakuivcustom
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Re: Asiana Airlines in huge financial trouble

Thu Mar 28, 2019 6:46 pm

ITSTours wrote:
So there is currently a big barrier of entry especially for longhaul markets and that is why Korea can sustain two FSCs. (Taiwan with a smaller population and economy size will have three soon!) Let us see when Air Premia comes into the market and how Asiana and Air Premia perform.


Taiwan has 3 FSCs right now. Ok, FAT (Far-Eastern Air Transport/FE) is too small to be relevant in a big picture, but still, they're a FSC (BTW, if you're a Mad Dog fan in that region, you better fly with FAT soon before those old Mad Dogs are gone. Although god knows how things will work since the plan is to get some MAX to replace those MDs). If anything, for years Taiwan actually have 4 FSCs before TransAsia went out of business.

Taiwan only has a single LCC, though (Tigerair Taiwan, which is owned by CI no-less), compare to 3 indepedent LCCs (ZE/TW/7C) + 3 affiliated LCCs (LJ for KE, RS/BX for OZ) in South Korea.
 
SeoulIncheon
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 1:23 am

jbs2886 wrote:
SeoulIncheon wrote:
juliuswong wrote:
They belong to one of South Korea largest conglomerate Kumho Group. I don't see how they will collapse, as OP has mentioned it is too big to fail. Not forgetting they have many subsidiaries including, not limited to, Air Busan and Air Seoul.


Actually Kumho Group has been in very bad shape recently. I see Asiana financial trouble becoming the last straw that fells Kumho Group... Asiana Airlines and Kumho Tires are the only two companies that is worth something at this point.


Apparently Kumho Tires was split off? https://en.wikipedia.org/wiki/Kumho_Tire (I know, Wikipedia).


Forgot that the sale was already done - Kumho tires was sold off to Chinese private equity fund (by Kumho Tires creditors). Chairman Park tried to keep it but he simply didn't have funds.
 
SeoulIncheon
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 1:29 am

ITSTours wrote:
EBiafore99 wrote:
ITSTours wrote:
Bloomberg summarized the news better than I did.
https://www.bloomberg.com/news/articles ... ge-of-junk


Most interesting part of the article:
Asiana will seek another audit as soon as possible to get an “unqualified” opinion, a spokesperson said Monday.

I just can't figure out why Asiana essentially be so blunt that they are opinion shopping and believe that even an unqualified opinion later on would negate the qualified opinion. We accountants are typically pretty cautious people, so for a qualified opinion to come out, that's a BIG deal that I don't see any reputable accounting firm wanting to touch.


They got the unqualified opinion from the Samil PwC on 26th already.
But Asiana's operating and net income got slashed so much. Operating income went straight from black to red. How much cooking they did before the audit?


Asiana can't change extrtnal auditor so it basically meant Asiana will do what it takes to get unqualified opinion - apparently Asiana caved in and slashed net income and operating income.
It is very rare that a listed company in Korea fails to get an unqualified opinion - the fact that PwC dared not to sign an unqualified opinion tells a lot about Asiana Airlines. It basically means that they are willing to forego Asiana as client and take reputational hit(among potential clients)for being harsh rather than sign off Asiana's financial report.
 
juliuswong
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 2:51 am

SeoulIncheon wrote:
ITSTours wrote:
EBiafore99 wrote:

Most interesting part of the article:
Asiana will seek another audit as soon as possible to get an “unqualified” opinion, a spokesperson said Monday.

I just can't figure out why Asiana essentially be so blunt that they are opinion shopping and believe that even an unqualified opinion later on would negate the qualified opinion. We accountants are typically pretty cautious people, so for a qualified opinion to come out, that's a BIG deal that I don't see any reputable accounting firm wanting to touch.


They got the unqualified opinion from the Samil PwC on 26th already.
But Asiana's operating and net income got slashed so much. Operating income went straight from black to red. How much cooking they did before the audit?


Asiana can't change external auditor so it basically meant Asiana will do what it takes to get unqualified opinion - apparently Asiana caved in and slashed net income and operating income.
It is very rare that a listed company in Korea fails to get an unqualified opinion - the fact that PwC dared not to sign an unqualified opinion tells a lot about Asiana Airlines. It basically means that they are willing to forego Asiana as client and take reputational hit(among potential clients)for being harsh rather than sign off Asiana's financial report.

I follow the news closely as well, what Samil PwC did is commendable and simply a breath of fresh air for South Korea which in the past has been riddled with financial scandals and the government did not do enough to avoid these malpractise and penalise heavily those who did wrong. Instead they use the Act stating those companies or chaebol are too big to fail and "of economic importance" to let off those criminals. The good thing is the CEO resigned from both Asiana and Kumho Industrial Group, however he remains the largest shareholder.

They have since restated their financial statement and got the auditor to sign off. Now the concern is how can they afford new aircraft since they debt ratio is 649%!!
- Life is a journey, travel it well -
 
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c933103
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 3:53 am

juliuswong wrote:
SeoulIncheon wrote:
ITSTours wrote:

They got the unqualified opinion from the Samil PwC on 26th already.
But Asiana's operating and net income got slashed so much. Operating income went straight from black to red. How much cooking they did before the audit?


Asiana can't change external auditor so it basically meant Asiana will do what it takes to get unqualified opinion - apparently Asiana caved in and slashed net income and operating income.
It is very rare that a listed company in Korea fails to get an unqualified opinion - the fact that PwC dared not to sign an unqualified opinion tells a lot about Asiana Airlines. It basically means that they are willing to forego Asiana as client and take reputational hit(among potential clients)for being harsh rather than sign off Asiana's financial report.

I follow the news closely as well, what Samil PwC did is commendable and simply a breath of fresh air for South Korea which in the past has been riddled with financial scandals and the government did not do enough to avoid these malpractise and penalise heavily those who did wrong. Instead they use the Act stating those companies or chaebol are too big to fail and "of economic importance" to let off those criminals. The good thing is the CEO resigned from both Asiana and Kumho Industrial Group, however he remains the largest shareholder.

They have since restated their financial statement and got the auditor to sign off. Now the concern is how can they afford new aircraft since they debt ratio is 649%!!

If I was reading it correctly, 649% was the airlines' original debt ratio before all these things happen
Also, I guess recently Korean government's indication to go after those privileged groups heavy handedly might have helped the situation to be uncovered?
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juliuswong
Posts: 2021
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 5:21 am

c933103 wrote:
juliuswong wrote:
SeoulIncheon wrote:

Asiana can't change external auditor so it basically meant Asiana will do what it takes to get unqualified opinion - apparently Asiana caved in and slashed net income and operating income.
It is very rare that a listed company in Korea fails to get an unqualified opinion - the fact that PwC dared not to sign an unqualified opinion tells a lot about Asiana Airlines. It basically means that they are willing to forego Asiana as client and take reputational hit(among potential clients)for being harsh rather than sign off Asiana's financial report.

I follow the news closely as well, what Samil PwC did is commendable and simply a breath of fresh air for South Korea which in the past has been riddled with financial scandals and the government did not do enough to avoid these malpractise and penalise heavily those who did wrong. Instead they use the Act stating those companies or chaebol are too big to fail and "of economic importance" to let off those criminals. The good thing is the CEO resigned from both Asiana and Kumho Industrial Group, however he remains the largest shareholder.

They have since restated their financial statement and got the auditor to sign off. Now the concern is how can they afford new aircraft since they debt ratio is 649%!!

If I was reading it correctly, 649% was the airlines' original debt ratio before all these things happen
Also, I guess recently Korean government's indication to go after those privileged groups heavy handedly might have helped the situation to be uncovered?

Yes, good to see the government is finally clamping down on big conglomerates, instead of being intimidated by them. Long overdue.

The original debt ratio was 505%, after restatement to add in aircraft leasing commitment and revised value for equity stakes it has increased to 649%. https://asia.nikkei.com/Business/Asiana ... ing-fiasco
- Life is a journey, travel it well -
 
ITSTours
Topic Author
Posts: 585
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 8:17 am

juliuswong wrote:
c933103 wrote:
juliuswong wrote:
I follow the news closely as well, what Samil PwC did is commendable and simply a breath of fresh air for South Korea which in the past has been riddled with financial scandals and the government did not do enough to avoid these malpractise and penalise heavily those who did wrong. Instead they use the Act stating those companies or chaebol are too big to fail and "of economic importance" to let off those criminals. The good thing is the CEO resigned from both Asiana and Kumho Industrial Group, however he remains the largest shareholder.

They have since restated their financial statement and got the auditor to sign off. Now the concern is how can they afford new aircraft since they debt ratio is 649%!!

If I was reading it correctly, 649% was the airlines' original debt ratio before all these things happen
Also, I guess recently Korean government's indication to go after those privileged groups heavy handedly might have helped the situation to be uncovered?

Yes, good to see the government is finally clamping down on big conglomerates, instead of being intimidated by them. Long overdue.

The original debt ratio was 505%, after restatement to add in aircraft leasing commitment and revised value for equity stakes it has increased to 649%. https://asia.nikkei.com/Business/Asiana ... ing-fiasco


I don't know where 505% came from but it was 625% (consolidated) before audit. Nikkei got it wrong.
Source:
http://dart.fss.or.kr/dsaf001/main.do?r ... 0326800053

By the way Asiana as a separate entity has 814.9% D/E ratio. Ouch...
 
MIflyer12
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Re: Asiana Airlines in huge financial trouble

Fri Mar 29, 2019 12:23 pm

What's the fixation with debt to equity ratio? Airlines soldier on for years with low equity - even negative equity. They go into to debt to buy very expensive (but also long-lived) assets.
 
ITSTours
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Re: Asiana Airlines in huge financial trouble

Thu Apr 11, 2019 4:04 pm

MIflyer12 wrote:
What's the fixation with debt to equity ratio? Airlines soldier on for years with low equity - even negative equity. They go into to debt to buy very expensive (but also long-lived) assets.


If the debts were only for airplanes then fine. KE has a high D/E ratio as well but they can deal with it. (Although they might have some lingering effects from Hanjin shipping liquidation.)

OZ's debt are much more short-term, and bulk of those are not for airplanes.
 
ITSTours
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Re: Asiana Airlines in huge financial trouble

Thu Apr 11, 2019 4:21 pm

Asiana requested 500 billion won (439 million USD) loan from the Korea Development Bank, a state-owned bank and the main creditor for Asiana.
https://www.google.com/amp/www.business ... dxno=30784

Park family provided 4.8% of Kumho Busline as a collateral. Which is less than 20 million USD. Also they promised to sell Asiana after 3 years and they fail to restructure it. Park Sam-koo, the former chairman, who basically failed the airline, will never return.

KDB rejected.
https://www.google.com/amp/s/in.mobile. ... NKCN1RN0J0

The chairman of Financial Services Commission (SEC equivalent?) literally asked what will be different when his son leads the airline even if Park Sam-koo does not.

So the drama continues, and there is so much speculation about Asiana selling its Air Busan, Air Seoul (their two child LCCs) or selling itself. Air Busan stock skyrocketed for about 30%.
 
juliuswong
Posts: 2021
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 11:21 am

Just hope that Korean Airlines and Asiana pull through. Both full service carrier have its own issue that require urgent resolution.
- Life is a journey, travel it well -
 
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c933103
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 11:42 am

ITSTours wrote:
Asiana requested 500 billion won (439 million USD) loan from the Korea Development Bank, a state-owned bank and the main creditor for Asiana.
https://www.google.com/amp/www.business ... dxno=30784

Park family provided 4.8% of Kumho Busline as a collateral. Which is less than 20 million USD. Also they promised to sell Asiana after 3 years and they fail to restructure it. Park Sam-koo, the former chairman, who basically failed the airline, will never return.

KDB rejected.
https://www.google.com/amp/s/in.mobile. ... NKCN1RN0J0

The chairman of Financial Services Commission (SEC equivalent?) literally asked what will be different when his son leads the airline even if Park Sam-koo does not.

So the drama continues, and there is so much speculation about Asiana selling its Air Busan, Air Seoul (their two child LCCs) or selling itself. Air Busan stock skyrocketed for about 30%.

https://www.reuters.com/article/us-kumh ... SKCN1RM0QY
Seems like they confirmed they will sell the airlines in certain condition
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c933103
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 11:47 am

MIflyer12 wrote:
What's the fixation with debt to equity ratio? Airlines soldier on for years with low equity - even negative equity. They go into to debt to buy very expensive (but also long-lived) assets.

That's how the media paint the company as being in such a bad shape.
It's pointless to attempt winning internet debate. 求同存異. よく見て・よく聞いて・よく考える
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VTCIE
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 1:18 pm

The world cannot afford the collapse of two big full-service carriers at once. India has practically lost one of its best-known full-service brands; I hope South Korea does not suffer the same fate. As for the airlines that remain, KE has an astronomically higher reputation than AI.

Like HU, OZ is a part of a diversified conglomerate. Even though HNA and Kumho are in deep financial trouble, they are managing to keep their airlines (of which there are many) afloat. This cannot be said for 9W (having multiple businesses), even though there was technically a second airline (S2, JetKonnect).
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ITSTours
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 2:01 pm

VTCIE wrote:
The world cannot afford the collapse of two big full-service carriers at once. India has practically lost one of its best-known full-service brands; I hope South Korea does not suffer the same fate. As for the airlines that remain, KE has an astronomically higher reputation than AI.

Like HU, OZ is a part of a diversified conglomerate. Even though HNA and Kumho are in deep financial trouble, they are managing to keep their airlines (of which there are many) afloat. This cannot be said for 9W (having multiple businesses), even though there was technically a second airline (S2, JetKonnect).


Kumho was once a diversified conglomerate. But the chairman failed the company, so they have lost significant subsidiaries, such as Kumho Tire. Now Asiana is responsible for more than 60% of the revenue of the Kumho Asiana group. When Kumho lose Asiana then they are left with not so much.
 
blueflyer
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 2:39 pm

SeoulIncheon wrote:
Asiana can't change extrtnal auditor so it basically meant Asiana will do what it takes to get unqualified opinion

Why can't they?

SeoulIncheon wrote:
It is very rare that a listed company in Korea fails to get an unqualified opinion - the fact that PwC dared not to sign an unqualified opinion tells a lot about Asiana Airlines.

It is very rare that a Big Four would issue a qualified opinion on a company as visible as Asiana. They've made the airline toxic for a while, even if a subsequent unqualified opinion was issued soon after.

VTCIE wrote:
The world cannot afford the collapse of two big full-service carriers at once. India has practically lost one of its best-known full-service brands;

The world would survive the disappearance of Jet and Asiana just fine. Neither one is a large player on the global aviation market.
 
SeoulIncheon
Posts: 101
Joined: Mon Jul 16, 2018 4:52 am

Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 3:48 pm

blueflyer wrote:
SeoulIncheon wrote:
Asiana can't change extrtnal auditor so it basically meant Asiana will do what it takes to get unqualified opinion

Why can't they?

SeoulIncheon wrote:
It is very rare that a listed company in Korea fails to get an unqualified opinion - the fact that PwC dared not to sign an unqualified opinion tells a lot about Asiana Airlines.

It is very rare that a Big Four would issue a qualified opinion on a company as visible as Asiana. They've made the airline toxic for a while, even if a subsequent unqualified opinion was issued soon after.

VTCIE wrote:
The world cannot afford the collapse of two big full-service carriers at once. India has practically lost one of its best-known full-service brands;

The world would survive the disappearance of Jet and Asiana just fine. Neither one is a large player on the global aviation market.


1. It wpuld constitute change of external auditor mid-term(term is three years by law) and Asiana would have to have good reason stipulated in law for changing. Of course giving a qualified opinion is not a good reason for changing an auditor - and changing an auditor without good reason is criminal offense.

2. In practice the opposite is true. Issuing a qualified opinion for high-profile company carries a big business risk (as they will certainly lose business with Asiana after their term is over, and other companies would not want to do business with them too) so qualified opinion will be issued only when absolutely necessary. Unless a company goes bankrupt before auditor term is over, it is always less risky to just give unqualified opinion to a high profile company.
 
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PM
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 4:28 pm

Such a shame. I've flown them both short- and long-haul. A good airline.
 
ITSTours
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Re: Asiana Airlines in huge financial trouble

Sat Apr 13, 2019 6:39 pm

http://www.investchosun.com/2019/04/12/3236607
(Article in Korean)

Invest Chosun reports that Kumho owner family decided to sell Asiana. Not officially confirmed yet. How, to where, for how much price, etc., remains to be seen. If they can find a new financially stable owner with a good amount of cash injection, then Asiana may become a much more significant player in the NE Asia market. Especially when a family feud is likely to occur at Korean Air.
 
Blerg
Posts: 4177
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Re: Asiana Airlines in huge financial trouble

Sun Apr 14, 2019 7:03 am

So where did they go wrong? I wonder if they really needed the A380.
 
Byrdluvs747
Posts: 2540
Joined: Thu Jul 15, 2004 5:25 am

Re: Asiana Airlines in huge financial trouble

Sun Apr 14, 2019 10:42 am

ITSTours wrote:

Invest Chosun reports that Kumho owner family decided to sell Asiana.


If this is or eventually becomes true, then the more interesting question is who are the potential buyers? Unless S. Korea has no problems with a national monopoly, I'll assume KE is out of the running. What are the foreign ownership limits in S. Korea?

If we see an alliance switch due to an investor being another airline.....

Oneworld:
- Who benefits from OZ joining OW?
- Will JL and CX object?
- Would AA, BA, or QF have any interest?
- Given AA's JV with JL, I'm not sure how they could be involved, but I can see how they would benefit.

Star:
- Is there a *A member who would be interested in an OZ stake? NH, or SQ?

Skyteam:
- Would the Korean government allow all of Korea to be dominated by ST?
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