Korean Air Lines Co. dropped the most in two years in Seoul trading on concerns the company may provide further funding to its affiliate Hanjin Shipping Co.
South Korea’s biggest carrier fell 11 percent, the most since September 2011, to close at 34,050 won in Seoul. The stock is the worst performer on MSCI Asia Pacific Index today. Hanjin Shipping declined 0.8 percent to 7,750 won, after earlier surging as much as 4 percent. The benchmark Kospi Index fell 1.4 percent.
Korean Air said yesterday it will provide 150 billion won ($142 million) to Hanjin Shipping to help ease the company’s “temporary” liquidity shortage. Excess shipping capacity and a slump in freight rates have caused companies including Hyundai Merchant Marine Co. and STX Pan Ocean Co. to lose money in the first half of the year. The announcement came after Korean Air last week posted a loss in the first nine months due to weak travel demand on its Japan services.
“While it’s not a lot of money, the airline industry isn’t doing all that well,” Um Kyung A, an analyst at Shinyoung Securities Co. in Seoul, said by phone. “Korean Air also has a lot of debt coming due next year.”
Korean Air is the biggest shareholder of Hanjin Shipping Holdings Co., the holding company that owns the largest stake in Hanjin Shipping Co. Both are members of Hanjin Group.
Hanjin Shipping is considering raising 300 billion won through share sale and loans, Korea Economic Daily reported, citing a company official it didn’t identify. The company is considering a share sale and loans, said Sonya Cho, Hanjin Shipping spokeswoman. Details haven’t been finalized, she said.
Korean Air Loss
Korean Air could consider providing additional funds to Hanjin Shipping, if it’s needed after talks with creditors, the airline said today in an e-mailed response to Bloomberg.
The company has about 745.1 billion won in bonds and loans maturing next year, compared with 47.7 billion won in 2013, according to data compiled by Bloomberg.
Hanjin Shipping may post a loss in the third quarter, typically the best period for shipping companies, Daishin Securities Co. said in a Sept. 30 report. The company is expected to announce its earnings as early as next week.
Korean Air lost 328.7 billion won in the January-September period, compared with net income of 105 billion won a year earlier. The airline last week finalized an order to buy 12 aircraft from Boeing Co. at a list price of $3.72 billion.