This article was published on Aug. 26, 2025, at 3:06 p.m. on the ChosunBiz MoneyMove site.
Korean Air will issue an additional corporate bond worth up to 300 billion won. Following HD Hyundai, it also plans to issue a 7-year corporate bond. Typically, the issuance of long-term bonds reflects a company's creditworthiness. The strategy is to diversify its borrowing structure by issuing long-term bonds at relatively low interest rates.
According to investment banking (IB) industry sources on the 26th, Korean Air plans to conduct a demand forecast on the 23rd of next month before issuing corporate bonds worth 200 billion won on the 30th. The issuance will be divided into 3-year, 5-year, and 7-year bonds, and if there is significant demand during the forecast, there are plans to issue up to 300 billion won more. The underwriters are Korea Investment & Securities, Samsung Securities, Shinhan Investment Corporation, Kiwoom Securities, Hanwha Securities, and Woori Investment & Securities.
What stands out is that Korean Air is attempting to secure 7-year funding. Although Korean Air's credit rating is A, it appears to have determined that it can issue a 7-year bond, having received evaluations equivalent to AA in the 2-3 year bond market. This is because it is generating stable cash flow as a national airline.
Issuing long-term bonds reduces the effort of refinancing funds at maturity each time and ensures financial stability. A source from a securities firm noted, "Korean Air is a company that continuously requires cash flow for existing corporate bond repayments, fuel payments, or lease liabilities," adding, "Issuing long-term corporate bonds stabilizes finances, enhances market credibility, and can positively impact its credit rating."
The fact that HD Hyundai, with the same credit rating, successfully issued a 7-year bond for the first time in the shipbuilding industry last month also encouraged Korean Air's 7-year bond issuance. There was a demand of 830 billion won for 10 billion won of HD Hyundai's 7-year corporate bond, which led to an issuance increase to 40 billion won. The issuance interest rate was set at 3.682%.
Korean Air is expected to use the funds raised this time to repay existing borrowing funds and for operational costs. Korean Air is preparing to refinance a 3-year corporate bond worth 128 billion won (interest rate 5.46%) next month. It had raised about 700 billion won through two rounds in February and May.
Korean Air is experiencing a rebound in performance due to the recovery of passenger demand and rising international flight fares. Second-quarter sales reached 3.9859 trillion won, with operating profit totaling 399 billion won. While operating profit decreased by 3.5% compared to the previous year, it surpassed market expectations, resulting in a favorable assessment.
Expectations are growing that performance will improve in the third quarter due to the summer vacation season and the acquisition of Asiana Airlines. Third-quarter sales are projected to be 4.2824 trillion won, with operating profit estimated at 625.8 billion won. Oh Jeong-ha, a researcher at DAOL Investment & Securities, analyzed, "Transportation is an industry where economies of scale are distinctly evident," adding, "There remains a momentum for increased travel demand due to long holiday periods."
Since its incorporation into Hanjin Group in 1969, Korean Air has grown into the largest private airline. It specializes in passenger and cargo air transport, also engaging in aerospace, maintenance, repair, and operations (MRO), encompassing the overall aviation industry. Operating with Incheon and Gimpo International Airports as hubs, it serves 106 cities in 39 countries worldwide as of 2024. Last year, it acquired Asiana Airlines, and the integration is expected to be completed by the end of next year.