The co-chief executive officer of Asiana Airlines is exiting the company following an accounting debacle that led two auditors to reject the company's annual reports.
Reports in Reuters on Thursday (March 28) said the auditors declined to sign off on Asiana's financials last week, leading to a possible credit rating downgrade, an earnings revision and a selloff on the stock market for both Asiana and its largest shareholder, Kumho Industrial, reports said.
Co-CEO Park Sam-koo has now resigned, just days after he stepped down from the same position at Kumho. The resignation sent shares for Asiana climbing by more than 15 percent, but analysts warn that it could lead to worse effects in the long term.
"His resignation could darken the clouds over one of South Korea's biggest airlines as the company faces critical moments," Daishin Securities analyst Yank Ji-hwan told the news outlet.
Meanwhile, Korea Development Bank said it would work with the airline to improve its finances after it had divested assets to limit its debt burden, resulting from investment in new aircrafts. Rising fuel prices and tightening competition among budget airlines have threatened the strength of Asiana's cash flow, reports noted. KDB is the top creditor for Kumho Asiana Group, whose flagship firm is the airline. The group said it would launch an "emergency management committee headed by [the] vice chairman of the group to normalize our management in a short period of time and will hire a respectable person outside the company as the new chairman."
Those struggles led Asiana to revise its financials and disclose a larger annual loss for 2018 in order to receive approval from auditors. Its debt is now more than six times its total equity, reports said.
Earlier this week reports in Bloomberg warned that financial concerns of the company were on the rise following notices from two credit rating agencies that Asiana's debt score could be downgraded to junk. Analyst pointed to the company's lack of accounting transparency as a key factor behind those warnings.