Korean Air to float “green” bonds to fund B787 purchase

Share

Korean Air (KE, Seoul Incheon) will issue “green” bonds as part of its KRW200 billion won (USD176 million) corporate debenture issue to become the first amongst the country’s carriers to float the so-called Environmental, Social and Governance (ESG) bonds.

According to a stock market disclosure, the carrier plans to conduct a book-building process to gauge demand for its planned corporate bond issue later this month and may increase the size of the bond issue if demand is strong. Some of the bonds would be issued in the form of ESG bonds, a type of sustainability debt offering aimed at financing corporate activities in environmentally friendly and sustainable projects.

The proceeds will be used to buy eco-friendlier aircraft such as B787-9s, and possibly B787-10s, built using advanced carbon-composite materials and aluminium alloy, thus raising fuel efficiency and emitting less greenhouse gas.

According to the ch-aviation fleets advanced module, the airline currently operates ten B787-9s with pre-existing plans to add more of the fuel efficient Dreamliners.

It is recalled that during the 2019 Paris Airshow, Korean Air signed a memorandum of understanding (MOU) with Boeing (BOE, Chicago O’Hare) to acquire a total of 30 aircraft including ten additional B787-9s and twenty B787-10s (including 10 to be leased from Air Lease Corporation with deliveries to have run from 2021 through 2023).

“We have decided to purchase 20 units (ten B787-9s, ten B787-10s) out of a total of 30 aircraft to be introduced,” it said. “The acquisition was planned to be distributed through 2025 through finance leasing and collateralized borrowing. For the remaining 10 units (ten B787-10s), we plan to introduce them on lease sequentially from 2022 (with each one subject to 12-year contracts) to ease the financial burden and prepare for future market volatility.”

Korean Air also said it is in talks with Airbus (AIB, Toulouse Blagnac) and Boeing regarding revised delivery timetables for its thirty A321-200N, thirty B737-8, and twenty B787 orders with actual schedules to be dictated by the market environment which still remains volatile.

The B787s will be used to replace the carrier’s existing fleet of older A330s and B777s which currently number eight A330-200s, twenty-two A330-300s, twelve B777-200(ER)s, four B777-300s, and twenty-six B777-300(ER)s.

The company last floated a corporate bond in April 2021 to the tune of KRW350 billion (USD310 million) in an effort to raise further funds and improve liquidity amid the ongoing COVID-related crisis in air travel demand. It was to deploy the funds to pay aircraft leasing and other debts.

As previously reported, Korean Air had already raised KRW3.3 trillion (USD2.95 billion) in a paid-in capital increase in March 2021. Of this, KRW1.5 trillion (USD1.34 billion) was to be used to acquire a 63.9% stake in Asiana Airlines (OZ, Seoul Incheon), a merger whose closure has been postponed to 2024, while the remaining KRW1.8 trillion (USD1.61 billion) was to be used to repay debts up until December 2021. Its parent, Hanjin Group, also issued KRW144 billion (USD129 million) worth of non-guaranteed bonds in March.

Share