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HNLSLCPDX
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Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 9:41 pm

Interesting read about KE potentially shutting down if things don’t improve due to COVID-19.

https://skift.com/2020/03/09/korean-air ... -business/
 
Ishrion
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 10:21 pm

I’d be surprised if they shut down before Asiana?
 
jbs2886
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 10:24 pm

HNLSLCPDX wrote:
Interesting read about KE potentially shutting down if things don’t improve due to COVID-19.

https://skift.com/2020/03/09/korean-air ... -business/


I find it unlikely KE would shutdown; if anything, this feels like a card being played in the board fight. I also would expect DL to do a cash injection or guarantee loans to secure KE.
 
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jfklganyc
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 10:27 pm

I could see any airline shutting down without major government bailouts

There is no sign of the virus (or associated Hysteria) ending


We are in a global economic freefall as of this morning
 
716131
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 10:45 pm

jbs2886 wrote:
HNLSLCPDX wrote:
Interesting read about KE potentially shutting down if things don’t improve due to COVID-19.

https://skift.com/2020/03/09/korean-air ... -business/


I find it unlikely KE would shutdown; if anything, this feels like a card being played in the board fight. I also would expect DL to do a cash injection or guarantee loans to secure KE.

If KE shutdown. This will be bad for Skyteam and even for South Korea. I know that country is in serious problem now due to the coronavirus. But I hope KE survives. I flew with them last year and they are great.
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hpff
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 11:02 pm

If the claims they've lost 80% of capacity are true, and it goes on for a certain amount of time, I can definitely see it as a possibility.
 
MavyWavyATR
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 11:02 pm

That'd be a huge loss if that happens; especially considering their influence in both SkyTeam and in the country as a whole.
 
MIflyer12
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 11:06 pm

jbs2886 wrote:
I also would expect DL to do a cash injection or guarantee loans to secure KE.


Let the Korean government spend its resources. DL is quickly going to see what its greater-than 20% equity stakes in AM and VS does to its profit & loss statement.
 
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chepos
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 11:15 pm

Didn’t DL just up their investment in KE? Seems like not the best timing.


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lightsaber
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Re: Will Korean Air Be Shutting Down?

Mon Mar 09, 2020 11:32 pm

chepos wrote:
Didn’t DL just up their investment in KE? Seems like not the best timing.


Sent from my iPhone using Tapatalk

Agreed, but DL had so much cash they either invested or were at risk of a hostile takeover.

Now DL will have to consider the best use of their cash. Some will be torched just for DL to make up losses.

DL's minimizing debt suddenly went from wise to super genius.


Don't celebrate, we were in a credit bubble that a black swan just took issue with.

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jbs2886
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:18 am

MIflyer12 wrote:
jbs2886 wrote:
I also would expect DL to do a cash injection or guarantee loans to secure KE.


Let the Korean government spend its resources. DL is quickly going to see what its greater-than 20% equity stakes in AM and VS does to its profit & loss statement.


DL losing its JV partner in Asia would have significant (negative) consequences for DL - its not simply an equity stake issue.
 
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enilria
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:42 am

MIflyer12 wrote:
jbs2886 wrote:
I also would expect DL to do a cash injection or guarantee loans to secure KE.


Let the Korean government spend its resources. DL is quickly going to see what its greater-than 20% equity stakes in AM and VS does to its profit & loss statement.

While I’m sure it’s tempting to use this situation to sink their talons deeper into KE, they should really worry about their own balance sheet.
 
tphuang
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:48 am

I can't imagine korean gov't would allow both OZ and KE go under. So at least one of the two will get bailed out if not both.

Counter argument is that KE shares are at a low point and any investment now will get rewarded 2 years later after they get gov't bail out. My guess is that if there is gov't bailout, they would demand more shares and dilute existing share holders like DL. So if DL doesn't want to see its shares dilute, it can put in more money.
 
onwFan
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:55 am

Maybe a KE+OZ merger? OZ is a loner in Star, largely ignored by LH & UA. Does South Korea really need 8-9 carriers? Some are subsidiaries of others, but still..
 
Cointrin330
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:58 am

chepos wrote:
Didn’t DL just up their investment in KE? Seems like not the best timing.


Sent from my iPhone using Tapatalk


Not the best timing, no, but DL had no choice. Their market share in Asia among the big 3 has shrunk considerably, though AA remains the smallest of the US3 to the region, though it has JL, CX, and China Southern as partners, all of course long before COVID19 left AA with a single destination in Asia temporarily, and that is HND/NRT. Their key Asia-based partners are China Eastern, which has not seen much of an expansion in cooperation (there was talk of making PVG DL's Asia hub) long, long before COVID-19. That has not worked out. DL and KE augmented their partnership so DL could have a partner to flow traffic through.
 
onwFan
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 1:04 am

Perhps this was discussed before, but on a slight tangent, does the KE/DL JV include DL’s routes to Japan? I was curious why KE stopped codesharing on those routes?

https://www.routesonline.com/news/38/ai ... es-in-s20/
 
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thekorean
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 4:48 am

Korean aviation market will shrink but I highly doubt Korean government will let both OZ and KE fail.
 
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 5:29 am

thekorean wrote:
Korean aviation market will shrink but I highly doubt Korean government will let both OZ and KE fail.


Merge?
 
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 5:45 am

jfklganyc wrote:
I could see any airline shutting down without major government bailouts

There is no sign of the virus (or associated Hysteria) ending


We are in a global economic freefall as of this morning

Except there are signs. Korean cases have not grown exponentially instead, after the initial spike, it’s been linear and now tapering.

Same is true in China.

People will get tired of cowering behind a years supply of toilet paper.
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TWA772LR
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 6:01 am

If any major global airline goes under due do SARS2 (official name, look it up) it will be Cathay.
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SEAflyer97
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 6:32 am

TWA772LR wrote:
If any major global airline goes under due do SARS2 (official name, look it up) it will be Cathay.

I don't know why you are trying to invent some names, try to look smart? SARS-cov-2 is the name of the virus, COVID-19 is the name of the disease caused by the virus.
 
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Antaras
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 8:03 am

It would be a surprise if KE collapsed before Cathay, Hainan, Air India or Hong Kong HX.

Anyway, I think that KE will be rescued by one of its Skyteam partner. VN is having a good business (before Covid-19; there are rumours that VN wants to create a joint-venture with KE), or DL from the other side of the Pacific.
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Toinou
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 8:46 am

onwFan wrote:
Maybe a KE+OZ merger? OZ is a loner in Star, largely ignored by LH & UA. Does South Korea really need 8-9 carriers? Some are subsidiaries of others, but still..


This is an interesting question.
It is a 50 million people country, with a rather high economical potential. It also is an "technically" island nation as it cannot be reached by land. All that is driving a rather huge use of air transport, especially for international travel. There is also the case of Jeju which is driving one of the most intensively travelled air link in the world if I'm not mistaken.
On the other hand, the country is rather small, with a huge concentration of population in the capital region and good part of the rest on a few corridors that can be (and largely already are) served efficiently with high-speed trains.

I'm no expert, but I would say that in comparable countries, there would probably be less air carriers, which means that concurrence should be harsh. Maybe this situation will have the effect of eliminating the weaker actors on the market.
 
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 10:04 am

ikramerica wrote:
jfklganyc wrote:
I could see any airline shutting down without major government bailouts

There is no sign of the virus (or associated Hysteria) ending

We are in a global economic freefall as of this morning

Except there are signs. Korean cases have not grown exponentially instead, after the initial spike, it’s been linear and now tapering.

Same is true in China.

People will get tired of cowering behind a years supply of toilet paper.


If SK manages to contain the virus, they won't reopen air travel so that they can get it again from other countries !
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 10:21 am

Won't the virus be sufficiently widespread within a few weeks that travel restrictions will become almost pointless?
 
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 10:32 am

aerokiwi wrote:
Won't the virus be sufficiently widespread within a few weeks that travel restrictions will become almost pointless?


Travel restrictions aren't the only problem but also sharp drops in passengers in general. Even if there were no travel restrictions, too many people are too scared to fly, which means less passengers and therefore less money.
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 10:34 am

filipinoavgeek wrote:
aerokiwi wrote:
Won't the virus be sufficiently widespread within a few weeks that travel restrictions will become almost pointless?


Travel restrictions aren't the only problem but also sharp drops in passengers in general. Even if there were no travel restrictions, too many people are too scared to fly, which means less passengers and therefore less money.


No doubt. And it's likely to remain suppressed all year requiring discounting to rebuild interest. But it will pass. And a flying airline is a lot healthier than a grounded one.
 
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zeke
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 10:41 am

TWA772LR wrote:
If any major global airline goes under due do SARS2 (official name, look it up) it will be Cathay.


Why do you say that ?

HKG only has 114 confirmed cases and 3 deaths, the city hasn’t had much growth in the virus numbers compared to a lot of other places, Italy and Korea both over over 7300 confirmed cases, Korea has had 51 deaths, Italy 366 deaths. USA has 213 confirmed cases and 11 deaths.

Because of SARS I think HKG is actually one of the safest places to be, the city had been through this before, they are more prepared.

I don’t like your use of the term SARS2, if this was SARS I would be fairly optimistic as it was very easily contained. The "coronavirus" as a word refers to a whole family of viruses, including bird flu, strains that caused the SARS outbreak in 2003 and MERS in 2013 as well as the current COVID-19.

The positive side is the disease has so far infected 113,255 people worldwide and killed 3,964 (3.5%). More than 62,000 (55%) have already recovered.
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tphuang
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 11:00 am

It's not about how many cases you have. It's about how the world perceives the danger. Right now, China and SK have more or less gotten the situation under control by shutting down cities and deploying abnormal amount of health care resource in the region. USA is getting more cases daily than China and South Korea right now. Continental Europe simply are losing control of the situation. But guess what, Asia is a no go zone and flights are still operating into France/Germany/Spain. It's all about perception.

KE has to ground its planes as long as people are afraid to fly into South Korea and rest of Asia.
 
716131
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 11:22 am

thekorean wrote:
Korean aviation market will shrink but I highly doubt Korean government will let both OZ and KE fail.

After they failed, will it only left some LCC in the country?
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MrHMSH
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 11:30 am

zeke wrote:
TWA772LR wrote:
If any major global airline goes under due do SARS2 (official name, look it up) it will be Cathay.


Why do you say that ?

HKG only has 114 confirmed cases and 3 deaths, the city hasn’t had much growth in the virus numbers compared to a lot of other places, Italy and Korea both over over 7300 confirmed cases, Korea has had 51 deaths, Italy 366 deaths. USA has 213 confirmed cases and 11 deaths.

Because of SARS I think HKG is actually one of the safest places to be, the city had been through this before, they are more prepared.

I don’t like your use of the term SARS2, if this was SARS I would be fairly optimistic as it was very easily contained. The "coronavirus" as a word refers to a whole family of viruses, including bird flu, strains that caused the SARS outbreak in 2003 and MERS in 2013 as well as the current COVID-19.

The positive side is the disease has so far infected 113,255 people worldwide and killed 3,964 (3.5%). More than 62,000 (55%) have already recovered.


I think he means more because of the demand reducing in places CX has a big presence in rather than because HKG itself is badly affected.
 
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 11:58 am

jbs2886 wrote:
I find it unlikely KE would shutdown; if anything, this feels like a card being played in the board fight. I also would expect DL to do a cash injection or guarantee loans to secure KE.



I would be surprised if KE went under before OZ I would think OZ's would be the airline in dire straights not KE.

But having said that I see DL tightening its belt like all other airlines even though they have billions in cash. DL is being effect just as much as any other major carrier they are trimming international flights and making tweaks to their domestic schedule. Since we don' know the what the long term effect of COVID-19 will be on the industry as a whole I think in the short term DL would rather save their money just in case this situation goes from bad to worst to make sure they DL has enough resources to weather the storm. DL should be looking to protect their own first (meaning their own employees) before helping out or giving or investing more resources to save a JV partner/s.
 
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jfklganyc
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:23 pm

HKG had major problems before the virus

I imagine those problems will continue
 
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Antaras
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:32 pm

Let me see if the newbie, Air Premia (why is this name so similar with the died-Primera Air) can slap both KE and OZ.
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Polot
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 12:47 pm

Antaras wrote:
Let me see if the newbie, Air Premia (why is this name so similar with the died-Primera Air) can slap both KE and OZ.

Let’s see if Air Premia ever starts first. I doubt it will be in first half of 2020 like originally planned.
 
AEROFAN
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 1:27 pm

hpff wrote:
If the claims they've lost 80% of capacity are true, and it goes on for a certain amount of time, I can definitely see it as a possibility.



And yet they have not reduced their prices. Econ 101 states that as demand falls prices should fall - this ain't happening. It is happening in the stock market, but not airline tickets... I wonder why
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Toinou
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 1:34 pm

AEROFAN wrote:
hpff wrote:
If the claims they've lost 80% of capacity are true, and it goes on for a certain amount of time, I can definitely see it as a possibility.



And yet they have not reduced their prices. Econ 101 states that as demand falls prices should fall - this ain't happening. It is happening in the stock market, but not airline tickets... I wonder why


Maybe because they went a bit further that economy 101 and know that if another factor than price is limiting demand, reducing prices will only make your income per customer diminish without increasing the number of customers which will reduce your total income.

We probably are in a case where most people don't want (or even cannot due to regulations) to travel, no matter the price.
 
ITSTours
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 1:43 pm

The government will bailout Korean Air if such thing happens. No question marks. See how much the government assisted in Asiana case.

I don't know the details but Korean Air does have high debt-to-equity ratio. Asiana once had a cross-default risk if the D/E ratio exceeded 1000% or could not pay back any of its loans (hence the government step-in). What if Korean has similar terms in its lease? Or what if it runs out of cash?

But it will definitely happen after LCC collapses. I believe KE has much more cash than any other LCCs in Korea. Eastar for example cannot even pay for its fuel cost.
 
jetwet1
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 2:02 pm

ITSTours wrote:
The government will bailout Korean Air if such thing happens. No question marks. See how much the government assisted in Asiana case.



I have to wonder if it came down to KE shutting down, could/would the Korean government try to persuade one of the big conglomerates (Hyundai) to step in ?
 
acavpics
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 2:14 pm

Why would KE shut down? I previously read that they were the most profitable airline in S. Korea (Until the coronavirus outbreak started). I'd expect to see Asiana shutting down long before KE.
 
RUIRCE
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 2:15 pm

I actually think Asiana has a better chance to make it out in good shape than Korean. They were recently bought by Hyundai Development so they have a parent with quite a bit of cash on hand.
 
raylee67
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 2:17 pm

While KE has been losing money for a number of years, Asiana is in much worse shape. Asiana was on the verge of shutting down before the virus hit. Korea as a economy can definitely support one national airline, if not two, once things pass. In the worst case scenario, the Korean government will step in. It has the financial firepower to do so.
319/20/21 332/33 342/43/45 359/51 388 707 717 732/36/3G/38/39 74R/42/43/44/4E/48 757 762/63 772/7L/73/7W 788/89 D10 M80 135/40/45 175/90 DH1/4 CRJ/R7 L10
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mdavies06
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 2:31 pm

This problem is not unique to KE and is the same that all major airlines in the world is facing now. The problem that KE faces today is the same across all airlines globally, the only difference being that APAC region carriers (Japan, Korea, China, Taiwan, South East Asia) see the fall off since Feb, whereas the rest of the world is just catching up. KE is not unique in terms of cutting international capacity by way more than 50%. So if we are discussing about KE and OZ, we might as well extend this discussion to all other carriers in the world.
Last edited by mdavies06 on Tue Mar 10, 2020 2:49 pm, edited 1 time in total.
 
richierich
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 2:45 pm

Coronavirus may only last a few weeks or months but I'm betting it will change the airline landscape and having a long-lasting effect. Weak airlines will disappear, strong airlines will survive but will have to rebuild their cash fortresses (imagine another outbreak later this year or early next year...) Don't expect "DL to send cash" to struggling KE or anything like that; airlines are all about self-preservation right now.

I predict there will be victims in the industry, some very well-known airlines may cease in the coming days and weeks. It is unfair to point at one airline or another and say they will or won't survive but there are clearly some airlines that are not in good shape to begin with, and the impact Coronavirus has had on the hospitality industry as a whole will cull the herd.
I'm not trying to be an alarmist but Flybe was only the beginning.
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mxaxai
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 3:46 pm

richierich wrote:
Coronavirus may only last a few weeks or months but I'm betting it will change the airline landscape and having a long-lasting effect. Weak airlines will disappear, strong airlines will survive but will have to rebuild their cash fortresses (imagine another outbreak later this year or early next year...) Don't expect "DL to send cash" to struggling KE or anything like that; airlines are all about self-preservation right now.

I predict there will be victims in the industry, some very well-known airlines may cease in the coming days and weeks. It is unfair to point at one airline or another and say they will or won't survive but there are clearly some airlines that are not in good shape to begin with, and the impact Coronavirus has had on the hospitality industry as a whole will cull the herd.
I'm not trying to be an alarmist but Flybe was only the beginning.

If this continues at the current rate, all businesses will suffer. Expect government bailouts. Of course only for "too-big-to-fail" airlines, nobody cares about FlyBe and the likes.
 
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TWA772LR
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 3:51 pm

MrHMSH wrote:
zeke wrote:
TWA772LR wrote:
If any major global airline goes under due do SARS2 (official name, look it up) it will be Cathay.


Why do you say that ?

HKG only has 114 confirmed cases and 3 deaths, the city hasn’t had much growth in the virus numbers compared to a lot of other places, Italy and Korea both over over 7300 confirmed cases, Korea has had 51 deaths, Italy 366 deaths. USA has 213 confirmed cases and 11 deaths.

Because of SARS I think HKG is actually one of the safest places to be, the city had been through this before, they are more prepared.

I don’t like your use of the term SARS2, if this was SARS I would be fairly optimistic as it was very easily contained. The "coronavirus" as a word refers to a whole family of viruses, including bird flu, strains that caused the SARS outbreak in 2003 and MERS in 2013 as well as the current COVID-19.

The positive side is the disease has so far infected 113,255 people worldwide and killed 3,964 (3.5%). More than 62,000 (55%) have already recovered.


I think he means more because of the demand reducing in places CX has a big presence in rather than because HKG itself is badly affected.

Bingo.
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jeffrey0032j
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 3:53 pm

aerokiwi wrote:
Won't the virus be sufficiently widespread within a few weeks that travel restrictions will become almost pointless?

If that happens, the world will be in deep trouble, you will have more things to worry about other than deciding whether to lift travel restrictions or not.
 
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zeke
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 4:11 pm

TWA772LR wrote:
Bingo.


I still dont understand your original post. Later today they should post last years results.

The passenger side across the region is soft at the moment, I don’t think it is fair to say it is just demand related or just one airline, there are a lot of travel restrictions in place which is impacting all airlines.

The freight side of the business has seen growth as there is less passenger belly space available.
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BuildingMyBento
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Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 4:53 pm

Toinou wrote:
onwFan wrote:
Maybe a KE+OZ merger? OZ is a loner in Star, largely ignored by LH & UA. Does South Korea really need 8-9 carriers? Some are subsidiaries of others, but still..


This is an interesting question.
It is a 50 million people country, with a rather high economical potential. It also is an "technically" island nation as it cannot be reached by land. All that is driving a rather huge use of air transport, especially for international travel. There is also the case of Jeju which is driving one of the most intensively travelled air link in the world if I'm not mistaken.
On the other hand, the country is rather small, with a huge concentration of population in the capital region and good part of the rest on a few corridors that can be (and largely already are) served efficiently with high-speed trains.

I'm no expert, but I would say that in comparable countries, there would probably be less air carriers, which means that concurrence should be harsh. Maybe this situation will have the effect of eliminating the weaker actors on the market.


There's an obscene amount of flights to/from/within the RoK (check: Jeju-anywhere, pre/post-epidemic).

They're just another country not doing their part for climate change.
 
gregn21
Posts: 276
Joined: Wed Jan 06, 2016 10:27 pm

Re: Will Korean Air Be Shutting Down?

Tue Mar 10, 2020 5:05 pm

I can only imagine if AA stepped in and saved KE. Ultimate jab back and DL.

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