Cash Crunch Could Force Korean MRO Sale

Credit: Joe Pries

Korean Air may have to sell off its substantial maintenance division along with other business units to shore up its liquidity during the COVID-19 crisis, according to The Korea Economic Daily.

Sales of the MRO arm, its frequent flyer program and its inflight catering service could net the flag carrier around $2.4 billion, reported the newspaper’s Korean Investors website.

This would be in addition to roughly $1 billion of state-backed lending extended to the carrier this week to help it cope with the crisis, support that was contingent on the airline presenting plans to sell off non-core assets.

However, it is unclear whether the maintenance division is part of such plans. Korean Investors said the catering division was a likelier initial divestment.

Korean Air faces significant near-term debt maturities and its financial situation was far from healthy even before the coronavirus crisis.

South Korean manufacturing group Hanwha has been touted as a possible buyer for the MRO arm following reports that it was interested in acquiring it last year.

Also in late 2019, Hanwha secured a major new contract with Rolls-Royce.

The British OEM had previously used Hanwha as a supplier for engine casings but decided to also order more complex turbine parts and core components.

Korean Air’s engine repair and overhaul capabilities cover the Pratt & Whitney PW1500G, PW4000, the General Electric GE90, the GP7200 and the CFM56-7.

It also has line and heavy maintenance capabilities across a range of Airbus and Boeing widebody and narrowbody aircraft.

The airline’s Gimpo maintenance headquarters provides base maintenance for its domestic operations; its Incheon facility supports the same for international operations; airframe heavy maintenance is also performed in Gimhae, the focus for Korean’s avionics support; while Bucheon is the airline’s engine shop.  

Alex Derber

Alex Derber, a UK-based aviation journalist, is editor of the Engine Yearbook and a contributor to Aviation Week and Inside MRO.