Korean Air announced Tuesday (7 July) that it plans to sell its inflight catering and duty-free business to Hahn & Company, a private equity fund. The airline said it’s board decided to sign an MOU to go forward with the deal and decided to later discuss details regarding follow-up steps such as due diligence. “Korean Air will do everything it can to ensure job security of its employees in these business sectors, and will communicate closely with the labour union,” the airline said. The carrier’s catering business, which at one time provided an average of 71,000 meals a day, earned US$290 million in revenue last year to generate an operating profit of US$25 million.
The company also said the COVID-19 pandemic and the subsequent fallout that has decimated the aviation sector will also force it to sell land it owns in downtown Seoul and its shares in Wangsan Leisure Development. The airline is also increasing capital by issuing new shares until the end of July.
The airline announced the share sale in May, saying it plans to issue new shares to secure 2.2 trillion won (US$1.79 billion) worth of funds to overcome the liquidity crisis caused by COVID-19. The airline said it plans to issue new shares to raise 1 trillion won as well as receive government aid.
Korean Air posted a first quarter net loss of 736.86 billion won (US$598 million) for the January-March quarter from 116.95 billion won a year earlier. The loss was a bit less than analysts had forecast after the airline saved money on fuel and by cutting its payroll. “Executives have forgone up to 50 percent of their salaries and 70 percent of employees are taking leave. The company was able to minimise losses with their support despite many challenges presented by the unprecedented COVID-19 crisis,” Korean Air President Woo Kee-hong said in a statement.