Seoul (dpa) – Despite the aviation crisis in the corona pandemic, South Korean airline Korean Air wants to take over the smaller local competitor Asiana Airlines. The purchase value amounts to 1.8 trillion won (1.37 billion euros), the South Korean industry leader said on Monday.
Once the acquisition is complete, Korean Air could become one of the ten largest airlines in the world. The acquisition has yet to be approved by the country’s antitrust authorities. The plans are also met with opposition from unions at both companies for fear of job losses.
The deal came after a planned acquisition of heavily indebted Star Alliance member Asiana Airlines by a consortium failed in September. The Kumho Asiana Group had agreed to sell the shares of its largest subsidiary in spring 2019 due to financial problems.
To shoulder the acquisition costs, Korean Air claims to raise 2.5 trillion won by issuing new shares next year. Hanjin Group’s holding company, Hanjin KAL, will participate in the share purchase. Korean Air also belongs to the Hanjin Transport and Tourism Group.
To make the merger work, the state-owned Korea Development Bank plans to invest 800 billion won in Hanjin KAL. The bank’s money will then flow to Korean Air through Hanjin KAL so that it can financially support both airlines, he said. The bank’s investment is made through the acquisition of shares and convertible bonds.
Korean Air cited the intention to stabilize the domestic aviation industry as the main reason behind the joint acquisition decision with Hanjin KAL at the time. “Considering that Korean Air’s financial situation could be threatened if the Covid-19 situation continues, a restructuring of the domestic aviation market is inevitable.” Korean Air will guarantee jobs for the employees of both companies.
South Korea has two full-service airlines, putting it at a competitive disadvantage against countries such as Germany, France or Singapore, according to Korean Air. By taking charge and expanding routes, fleets and capacities, the company will be able to participate to compete with the mega airlines.