It has been — to be understated — a very bad year for Asiana, the second largest airline in South Korea. Years of increasing debt loads have finally caught up with the airline, and it is now trying to shrink its way back to a comfortable place. This is very much a work in progress, but you can expect a fair amount of upheaval as things move forward.
Asiana started flying only in 1988, breaking up Korean Air’s monopoly as the hometown airline. By 1991 it was flying to the US (Los Angeles), and it grew quickly from there. Today it is a member of Star Alliance with 80+ airplanes flying around the globe. That may sound like a success story, but that would gloss over how the airline actually got to this point.
Like most large South Korean businesses, Asiana is part of a chaebol, a local word for a mega-conglomerate. What today is known as Kumho Asiana Group owns stakes in companies in all kinds of industries. Kumho Asiana spent a lot of money and raised a lot of debt to grow into a variety of industries.
That legacy of Kumho Asiana is visible everywhere with the company’s signature logo. If you ever wondered why Asiana’s logo looks a lot like Kumho tires, it’s by design.


But in the last decade, Kumho Asiana has had to shed some of its investments to try to pay down those crushing debts. Kumho Tire was sold off in 2017, and now Asiana itself may face the same fate. This isn’t a story about the parent company, however. Asiana Airlines has its own problems.
Earlier this year, word came out that the airline’s auditors refused to certify Asiana’s financial statements. Why? As Reuters explained:
Asiana’s auditor Samil PwC had previously said it could not complete its audit because it had not been provided with enough information to evaluate the airline’s provisional debt related to maintenance of leased aircraft, as well as the fair value of stakes in affiliates bought in 2018.
To get that audit completed, Asiana had to restate earnings, and it was a substantial hit. Operating profit plunged from 88.7 billion won to a mere 28.2 billion won (about US$24 million). And that led to a net loss nearly doubling from 105 billion to 196 billion won (about US$170 million).
That massive change sent shockwaves through the airline. With the restated financials, South Korean credit agencies warned they might downgrade the airline’s debt to junk status. If that were to happen, it would trigger provisions that would require Asiana to repay more than the 1 trillion won in debt it already has to repay this year. And that could be catastrophic for the financial future of the company.
As you can imagine, shares of the company plunged on this news and management sprung into action. It was like the airline had been completely asleep at the wheel, but all of a sudden, plans were quickly compiled to right the ship.
First, co-CEO Park Sam-koo stepped aside leaving Han Chang-soo as the sole CEO. Han sent a letter in early April telling employees that the airline would cut airplanes and routes but gave no details.
By the end of April, a bailout had been secured. Creditors would provide a staggering 1.6 trillion won (more than US$1 billion). Meanwhile, Kumho Industrial, which owns about a third of the airline, said it would sell its stake. This would result in improved liquidity and yes, financial stability. But still, Asiana wasn’t going to be able to just keep operating as it was. Cuts were coming.

First, the route cuts began. The airline will drop narrowbody service to Sakhalin and Khabarovsk along with A330 flights to Delhi this July. In perhaps a bigger surprise, Chicago service will end in October.
That last change may show the weakness of Asiana’s strategic position in the US market. While Korean Air has become Delta’s joint venture partner, and Incheon has become their primary connecting point between the US and Asia, Asiana has a much weaker position with fellow Star carrier United. United and ANA have the joint venture that sends traffic through Tokyo. Asiana is just a minor partner for United, at best. Apparently it’s so minor that United’s hometown Chicago hub can’t help sustain Asiana’s service there.
I imagine we may see more route cuts coming. Meanwhile, there’s the airline’s fleet problem. At last check, Asiana was flying 83 airplanes as follows:
Aircraft | # Passenger | # Cargo |
---|---|---|
A320/A321 | 25 | 0 |
767-300 | 6 | 1 |
A330-300 | 15 | 0 |
777-200ER | 9 | 0 |
A350-900 | 8 | 0 |
747-400 | 2 | 11 |
A380-800 | 6 | 0 |
In addition, it had 25 A321neos, 13 A350-900s, and 9 A350-1000s on order. That’s a lot of metal coming in to an airline that’s already bloated with debt. But instead of shedding orders, it looks like Asiana will be ditching older aircraft. In particular, it is eyeing the 767 and 747 fleet for cuts.
Many had speculated the small A380 fleet would also disappear. Those six airplanes currently fly one daily flight from Incheon to Bangkok, Frankfurt, Hong Kong, Los Angeles, New York/JFK, and Tokyo/Narita. After modifying other aircraft, the A380 remains the only airplane with First Class onboard… until September.
Beginning September 1, the First Class suites will remain, but they will no longer be sold as First Class. Instead, they will be sold as Business Suites with the same service as in Business Class, helping the airline to cut costs.
Except for what would ultimately be the elimination of the airline’s dedicated freighters, these changes all seem relatively minor so far. Even if the 747s and 767s go away, the orders will still give Asiana net growth. It may have new capital and owners by the end of the year, but that alone won’t turn the airline’s fortunes around. Bigger changes are needed.