Korean Air's decision to acquire Asiana Airlines will change the Korean airline industry landscape
In a move intended to stabilize the Korean aviation industry that has been hard hit by the ongoing pandemic, Korean Air, the flag carrier of South Korea, is set to acquire Asiana Airlines with a 63.9 percent stake.
The airline, which is already Korea’s biggest carrier, will acquire Asiana Airlines in a deal valued at 1.8 trillion won ($1.6 billion). The deal, which will make Korean Air one of the largest carriers in the world, is likely to be completed in the second half of 2021 after the country’s antitrust regulator reviews the deal over the issue of monopoly.
Korean Air will, over time, integrate three low-cost carriers, it’s own Jin Air and Asiana’s Air Busan and Air Seoul, after the acquisition of Asiana is complete.
Korean Air’s decision to acquire Korea’s second largest carrier comes in the wake of Asiana’s continuing financial struggles and the losses that the aviation industry has had to bear due to the ongoing pandemic. With the acquisition, Korean Air will become the world’s tenth largest airline in terms of fleet size. The similarities in the type of aircraft the two carriers have in their fleet – both operate the Airbus A380, Boeing 747, Airbus A330 and Boeing 777 – will make the acquisition seamless from an operational point of view.
“The company made the decision to help the country’s airline industry continue to grow (amid uncertainties) and minimize the injection of public funds (into Asiana),” Korean Air Chairman Cho Won-tae said in a statement. The job security of employees in the two carriers would be ensured, he added.
The airline will raise 2.5 trillion won through rights offerings early next year and use 1.5 trillion won to buy new shares that will be sold by Asiana and 300 billion won worth of Asiana perpetual bonds.
Ever since it suffered a financial crunch in April last year, Asiana Airlines had been on the look out for potential buyers. The crisis forced Kumho Asiana Group, its parent company, to sell about 34% of the carrier’s shares to avert the liquidity crisis. A consortium led by HDC Hyundai Development Company had signed a deal to acquire Asiana, as well as its six affiliates, but the deal fell through in September.
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