State-run Korea Development Bank and Export-Import Bank of Korea said Friday they would provide 1.2 trillion won ($972 million) of fresh loans to beleaguered Korean Air, the country’s flag air carrier.

The emergency funding came after the government announced Wednesday its plans to raise relief funds worth 40 trillion won to relieve key industries amid the economic fallout of COVID-19.

As that rescue plan is still pending at the National Assembly, authorities decided to take financial action through the two state-run lenders.

Earlier, the two state lenders decided to supply loans worth 1.7 trillion won ($1.40 billion) to Korea’s second-largest air carrier Asiana Airlines to help it stay afloat. As of the second week of April, the number of passengers boarding international flights had plunged by 98 percent from a year earlier, industry data showed. 

Similar to the lending scheme for Asiana Airlines, the state banks will issue loans to Korean Air and purchase consol bonds without a maturity date from the flag carrier to decrease its debt-to-asset ratio, bank officials said. 

The novel coronavirus has battered Korean Air in recent months, with the suspension of most international flights, which account 90 percent for its total sales. In addition, the company’s combined debts including corporate bonds and asset backed securities reached nearly 4 trillion this month. 

Meanwhile, the banks said they will not make additional support measures for low cost carriers such as Jeju Air or Jin Air. As of March, KDB has been operating an emergency financing program for budget airlines within the limit of 300 billion won and supplied nearly 126 billion won so far. 

By Choi Jae-hee (cjh@heraldcorp.com)