Last Year’s Successful 'Korean Air'... "Debt Ratio Significantly Reduced" (Comprehensive)

Thanks to the Paid-in Capital Increase... Debt Ratio Down by 400 Percentage Points

[Asia Economy Reporter Yoo Hyun-seok] Korean Air's financial structure significantly improved last year. During this period, the debt ratio dropped to 288.5%, nearly 400 percentage points lower than the previous year. This is attributed to a large-scale paid-in capital increase and favorable business performance. The debt ratio falling to the 200% range is the first time since 2007.

According to Korean Air's business report registered on the Financial Supervisory Service's electronic disclosure system on the 17th, the company's consolidated total liabilities last year were 19.8062 trillion KRW, about 2 trillion KRW less than the previous year (21.8783 trillion KRW). Total equity increased by more than 3 trillion KRW, from 3.3117 trillion KRW in 2020 to 6.8657 trillion KRW.

As a result, the debt ratio last year sharply decreased from 660.6% the previous year to 288.5%. Korean Air's debt ratio falling to the 200% range is the first time since 2007 (256.5%). Especially considering that from 2019, due to changes in lease accounting standards, lease liabilities that were not previously recognized began to be recorded as liabilities, this is a very low figure.

The biggest reason for Korean Air's financial improvement is the large-scale paid-in capital increase and the sale of the Songhyeon-dong site conducted last year. The company carried out a paid-in capital increase worth 3.3 trillion KRW and sold the Songhyeon-dong site for 557.8 billion KRW. At that time, Korean Air announced that 1.5 trillion KRW of the funds raised through the paid-in capital increase would be used for the acquisition of Asiana Airlines, and the remaining 1.8 trillion KRW would be used to repay maturing debts. In fact, Korean Air used 1.8159 trillion KRW for debt repayment. It used 700 billion KRW for the acquisition of Asiana Airlines, with 800 billion KRW as the remaining balance.

Thanks to the large-scale paid-in capital increase, other financial structures also improved. The debt dependency ratio, which was 61.7% in 2020, dropped to 46.9%, and the short-term debt dependency ratio also decreased from 23.2% to 20.1%. Korean Air's total borrowings last year were 12.5069 trillion KRW, more than 3 trillion KRW less than the previous year's 15.5379 trillion KRW. Short-term borrowings decreased from 1.9008 trillion KRW to 985.5 billion KRW.

In particular, due to favorable business performance last year, the pre-tax continuing operations profit margin also improved. The pre-tax continuing operations profit margin refers to the profit margin from all activities (operating and non-operating) before the company pays corporate tax. It turned positive from -12.3% in 2020 to 9.4% last year.

Korean Air recorded sales of 9.0168 trillion KRW and operating profit of 1.418 trillion KRW last year. These figures represent increases of 18.48% and 1221.20%, respectively, compared to the previous year. The biggest reason on an individual basis is the boom in the cargo industry. Korean Air recorded individual sales of 8.7534 trillion KRW, of which 6.6948 trillion KRW came from cargo, accounting for 76.5% of the total. Meanwhile, domestic and international routes recorded 268.7 billion KRW (3.1%) and 815.2 billion KRW (9.3%), respectively. Domestic sales slightly increased, while international sales decreased by nearly 1 trillion KRW.

The total number of employees last year was 17,992, a decrease of 526 from 18,518 the previous year. Their average salary was 69.13 million KRW, a slight increase from 68.19 million KRW the previous year. Cho Won-tae, chairman of the Hanjin Group, received a total of 3.43041 billion KRW from Hanjin KAL and Korean Air last year. He received 1.73241 billion KRW from Korean Air, the same amount as in 2020.

Additionally, the salary received from Hanjin KAL was 1.698 billion KRW, up 332 million KRW from 1.366 billion KRW in 2020. In 2020, he received president's salary from January to March and chairman's salary from April to December. As a result, the total salary in 2020 was lower than in 2021, when he received chairman's salary for the entire year. Effectively, it was frozen.