Korean Airlines Future flow airline tickets securitisation

Future flow airline tickets

2010:

Korean Air Lines (KAL) has returned to the securitization market. The underlying transaction involves the securitisation of KAL’s future and existing passenger ticket receivables on flights between Japan and Korea. The receivables are generated from ticket sales booked via IATA sales offices throughout Japan.

The deal is rated A1 and the bonds, issued through KAL Japan ABS 5 Cayman Limited, and are supported by an unconditional and irrevocable credit facility for the timely payment of scheduled principal and interest on the notes.

The Korea Development Bank (KDB) is providing the interest rate swap, which will mitigate any interest rate mismatch between the fixed commitment amount in the credit facility and the floating amount payment obligation in the notes.          

The transaction structure had to be amended from KAL’s previous transactions to reflect investors’ preference for transparency, new parties such as KoFC and KDB, and the Japanese parties.

With the strong yen and low interest rate environment, KAL was keen to lock in low-cost funding for their Japanese operations. The Japan-Korea routes are KAL’s most stable and highest yielding, especially with the improving economic conditions, boasting of an estimated market share of 40.7% on these routes.

[The Asset.com]