Draft Fund Provides 10 Trillion Won Support to Korean Air... Excluding LCC and Ssangyong Motor

Next Week Funding Application Announcement
Exclusion of Pre-COVID-19 Insolvent Companies from Support Targets

[Asia Economy Reporter Kangwook Cho] The Industrial Stabilization Fund (ISF) will provide up to 1 trillion KRW in funding to Korean Air.

According to financial authorities on the 3rd, the ISF Management Committee held its 6th meeting yesterday to discuss the direction of financial support for the aviation industry.

The committee first determined that Korean Air, which requires approximately 1 trillion KRW in funding in the second half of the year, meets the fund’s support criteria.

However, considering that detailed discussions on Korean Air’s specific funding needs and timing are ongoing, the committee decided to review the detailed support conditions once Korean Air formally applies for funding. The committee plans to announce the funding application next week.

In the case of Asiana Airlines, currently undergoing a merger and acquisition (M&A) process, the committee will monitor the situation and review specific funding needs once they become clear.

Regarding low-cost carriers (LCCs), about 400 billion KRW has been provided through policy finance so far, and the majority opinion was that support through the government’s livelihood and financial stability package program (135 trillion KRW + α) should be prioritized.

The committee members agreed to observe existing support programs and the financial status of LCCs and to reconsider whether to provide additional support to LCCs if necessary.

The members also agreed that it is appropriate to focus on supporting companies experiencing temporary liquidity crises due to COVID-19. They reached a consensus that companies already in poor financial condition before COVID-19 should prioritize financial restructuring efforts such as capital increases and asset sales.

Accordingly, Ssangyong Motor, which has been struggling financially since before COVID-19, is expected to be excluded from the fund’s support targets.

Meanwhile, the committee plans to hold a meeting on the 9th of next week to review the equity investment plan for the Special Purpose Vehicle (SPV) supporting industrial subcontractors.