Korean Air has announced its intention to acquire ailing Asiana Airlines (Asiana) despite strong protests from Asiana’s shareholders. Korea Development Bank (KDB) will be providing Korean Air with a loan of 800 billion won to help finance the deal. KDB is also a major creditor of Asiana. KDB hopes to finalize the deal by the year end, despite the concerns of many that major carriers are struggling to cope with the effects of the COVID-19 pandemic on the airline industry.
KDB will inject the capital into Hanjin KAL, the holding company of Korean Air’s parent Hanjin Group. Korean Air will increase its capital of 2.5 trillion won through a new shares issuance next year. Hanjin KAL will purchase these shares worth 730 billion won using the KDB capital. Korean Air also plans to purchase Asiana shares and bonds worth 1.8 trillion won, as part of a last step in becoming the biggest shareholder of the nation’s second-largest carrier.
“The new integrated airline will be able to secure competitiveness, and a reputation as the world’s 10th largest carrier following the deal,” KDB Chairman Lee Dong-gull said in an online press conference Monday. “The decision came amid growing calls for the KDB to take a more pre-emptive measure to salvage the aviation industry which has suffered the most damage from the prolonged coronavirus shock.”
This latest deal to be put forward comes in the wake of the September collapse of Hyundai Development Company’s collapsed takeover bid. Asiana’s union is concerned that the latest deal could see a severe paring back of the carrier’s employees through organizational restructuring, though the Fair Trade Commission is unlikely to intervene on the grounds of the creation of a potential monopoly as this appears to be the only option available to save Asiana. (US$1.00 = 1,105 won at time of publication.)
