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Korean Air Lines calls time on Hanjin?

SEOUL: August 31, 2016. News that Hanjin Lines has filed for bankruptcy protection from creditors suggests its largest single shareholder, sister company Korean Air Lines, thinks there's more chance of getting its money back through restructuring Hanjin than continuing to support overcapacity at below-cost rates.

Hanjin containershipAccording to a recent regulatory filing, the airline cited losses of US$344 million from its stake in the box carrier – which is part of the proposed five-carrier CYKHE Alliance announced in May this year that also includes CMA CGM.

In a response to the Hanjin move, CMA CGM said it had implemented "preventative measures" that includes immediate termination of service on the five routes it co-loads; Hanjin containers already aboard its vessels will be discharged to the final destination; halting the loading of its boxes on Hanjin vessels; and all of its containers on Hanjin ships will be unloaded and transshipped to CMA CGM and other partners.

These could include Hapag-Lloyd, "K" Line, Mitsui O.S.K. Lines, Nippon Yusen Kaisha and Yang Ming.

Meanwhile Korean Air Lines reported second quarter (Q2) 2016 revenue of KRW2.8 trillion and a net loss of KRW251 billion – up from KRW169 billion in the same period last year. Cargo contributed 22.9 percent of Q2 revenue and yield fell 10.9 percent to US$0.22 cents as the airline lost KRW33 billion on its Hanjin stock.

Korean reported a reduction of its Hanjin liability from KRW520 billion to KRW162 billion in Q2 compared to 2015, and total liabilities of KRW22.3 trillion as its shareholder equity fell 17.4 percent to KRW2.06 trillion.

The airline says its Q3 cargo business plan will focus on utilizing belly space in passenger aircraft and carrying high yield cargo items. However despite overcapacity in the air cargo industry, the airline took delivery of a seventh B747-8 in August and four more B777 freighters will be added to its fleet by year-end – bringing the total to 11 according to the Q2 report.

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