S. Korea’s top two carriers, Korean Air and Asiana Airlines, have suffered credit rating downgrades due to huge net losses.
Rating firms NICE Investors Service and Korea Ratings have cut Korean Air's rating from A- to BBB+.
NICE Investors Service has maintained Asiana Airlines’ credit rating at BBB+ but revised its outlook on Asiana Airlines to negative. Korea Ratings has lowered Asiana Airlines’ credit rating to BBB.
Though the two airlines were initially expected to rapidly turn around thanks to a plunge in oil prices, excessive financial costs and foreign currency exchange losses sent them posting worse-than-expected results
In the second quarter, Korean Air logged a net loss of 169.2 billion won and Asiana Airlines 85.3 billion won. Strong competition from budget airlines and foreign carriers has sapped their control over the market and revenue generation power.
The credit rating downgrades mean that Korea Air has to hike interest rates on its corporate bonds. As previously scheduled, Korea Air will go ahead with issuing corporate bonds worth 200 billion won.
