Asiana Airlines Inc. said Monday it will cut its capital base to improve its financial status amid the COVID-19 pandemic.

Shareholders approved a 3:1 capital reduction plan as the airline's capital erosion rate reached 56.3 percent at the end of June, a company spokesman said.

"The company made the decision to avoid being designated as issues for administration or having its credit rating downgraded," he said over the phone.

After the reduction, the number of Asiana's overall stocks will fall from 223.2 million shares to 74.4 million shares, while its capital will decrease from 1.11 trillion won ($1.02 billion) to 372.1 billion won.

Asiana was one of the airlines hit hardest by the pandemic this year. It has suspended most flights on international routes since March as travel demand dried up and suffered snowballed debts.

Korean Air Lines Co., the country's biggest and national flag carrier, is in the process to acquire the smaller local rival for 1.8 trillion won by June next year.

On Monday, Asiana plunged 11 percent to 4,470 won, far underperforming the broader KOSPI's 0.3 percent loss. (Yonhap)