SEOUL (Reuters) – Korean Air Lines Co Ltd 003490. KS plans to spend 1. 8 trillion won ($ 1. 62 billion) to become the largest shareholder in debt-ridden Asiana Airlines 020 560. KS, in its first major aviation merger since COVID-19 has brought the industry to its knees.
It will also be the biggest change in air travel in South Korea since the founding of Asiana before the 1988 Seoul Olympics, with the airline eventually merging into Korean Air to create a national carrier that takes over about 60% of the international airlines..
Working together is likely to give the couple more opportunity to avoid the fate of many airlines around the world, as anti-virus restrictions on movement and border closures have weakened passenger demand and forced carriers into bankruptcy..
The deal is also an exemption for heavily indebted Asiana, which remained high in September through a cash injection from creditors led by the Korea Development Bank (KDB), after major shareholder Kumho Industrial Co. Ltd. 002990. KS withdrew from the sale.
Korean Air Lines – controlled by Hanjin Kal 180640. KS – She said she would buy 1. 5 trillion won in new Asiana shares giving it 63. 9% and 300 billion won Asiana convertible bonds.
“Amid the collapse of the Asiana sales deal in addition to the COVID-19 pandemic, KDB has formed a consensus with Hanjin Group to reorganize the aviation industry and pursue integration,” KDB Chairman Lee Dong-Gull said in a briefing on Monday..
To fund the Asiana deal, Korean Air said it will release No. 2. Shares will be worth 5 trillion won next year, with buyers including parent company Hanjin Kal. He will use the remaining funds to pay off the debt.
“We expect the transaction and operation to be completed by the second half of 2021,” Asiana Airlines CEO Han Chang-soo said in a message to employees on Monday.. . He said there would be no « artificial restructuring » after the deal.
Hanjin Kal’s largest shareholder, the Korea Corporate Governance Improvement Fund (KCGI), said that KDB’s investment in Hanjin Kal could likely support the current management of Korean Air. The fund prefers to replace family-appointed executives with foreigners.
On Monday it said it would use whatever law allows to oppose the plan to buy Asiana using taxpayer money, which it said was forcing investors and employees to make sacrifices..
In December, Kumho agreed to sell 30. 77% share of Asiana versus 2. 5 trillion won for Hyundai Development Co 294870. KS and Mirae Asset Daewoo Co Ltd 006800. KS. It pulled out in September as the COVID-19 outbreak prompted buyers to look for better terms.
With Asiana now joining Korean Air, it will overlap 800 to 1,000 roles. However, KDB aims to avoid artificial restructuring and ensure job security through the natural annual decline in staff numbers, work involved in merging airlines, and new ventures, said KDB Vice President Choi Dae-hyun.. .
A Korean Airlines spokeswoman told Reuters: « At the moment, Korean Air and Asiana will operate as two independent subsidiaries, but once the integration, the Asiana brand will be canceled. ». .
The combination of the two largest companies in South Korea will create the number 15 largest airline in the world based on the industry’s measure of kilometers traveled by passengers, according to 2019 data from the International Air Transport Association. This marks a jump from 28 for Korean Airlines and 42 for Asiana.
KDB also aims to merge 272450 budget airlines Jin Air Co Ltd. Kansas, Busan Airlines Ltd. 298690. Choi said KS and Air Seoul.
“Inclusion in South Korea makes a lot of sense. Before COVID-19 there were too many competitors, especially now, said Brendan Soby, an independent aviation analyst based in Singapore.. .
Asiana share price increased by 29%. 8% in Monday’s trading, while the price of Korean Air was up 15. 2% and Hanjin Cal rose 8. 2%. Cosby Standard . KS11 was high 1. 9%.
Submit a report from Hekyung Yang and Joyce Lee; Co-reporting by Jimmy Fred in Sydney. Edited by Christopher Cushing
All quotes are at least 15 minutes late. See here for a complete list of exchanges and delays.
Korean Air, Asian Airlines, South Korea, Seoul
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