Jeju Air "Eastar, Evasive of Responsibility... Contract Termination if Precondition Not Met"

Eastar Responds to Various Allegations as "Distortion"
"Eastar Holdings' Donated Shares Subject to Pledge... No Right to Announce Without Consultation"
"Doubts Over Stable Management Raise Weight of Acquisition Withdrawal

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Jeju Air, which is engaged in a truth dispute over the acquisition and merger (M&A) process with Eastar Jet, has dismissed various allegations raised. Jeju Air emphasized, "Eastar Jet was only eager to evade responsibility," and stated, "If the preconditions are not fulfilled, the contract can be terminated."

On the afternoon of the 7th, Jeju Air issued a statement saying, "In a situation where difficulties in the aviation market have intensified due to the novel coronavirus infection (COVID-19), it is necessary to have confidence that the company can be operated soundly and repay (government support)," expressing this position.

◆ Jeju Air moves to block management intervention rumors = First, Jeju Air refuted the management intervention rumors raised by the Eastar Jet Pilots' Union and others as "distortions."

Regarding the suspension of domestic flight routes, Jeju Air explained, "Immediately after signing the Stock Purchase Agreement (SPA), we received notices of suspension of ground handling services and fuel supply from ground handling companies and oil companies, and international flights were already not operating," adding, "Since operating would only increase losses, we 'advised' that it would be better to shut down domestic flights as with international flights."

Regarding the restructuring conspiracy theory, Jeju Air pointed out, "Eastar Jet sent the relevant documents about three hours after the meeting ended at 12 PM on March 9 (when the executives of both companies held a meeting)," and "This suggests that Eastar Jet had already prepared the documents."

Concerning the claim that Jeju Air agreed to bear the unpaid wages of employees, Jeju Air stated, "The SPA includes a clause that business downturn due to COVID-19 alone is not a reason for contract termination, but there is no clause that holds us responsible for all damages," and criticized, "Unpaid wages are illegal acts under the Labor Standards Act and are matters that the current management must take full responsibility for and resolve."

◆ "No significance in Representative Lee Sang-jik's share donation" = Jeju Air also expressed that the decision by Lee Sang-jik, a Democratic Party lawmaker and the effective major shareholder, to donate all of Eastar Jet shares (38.6%) held through Eastar Holdings is meaningless. Since a lien has been established on the Eastar Jet shares held by Eastar Holdings for the 22.5 billion KRW deposit and loan previously paid by Jeju Air, Eastar Holdings does not have the right to announce share donation without consultation.

Jeju Air pointed out, "Contrary to what was claimed in the media, the proposal made by the seller (Eastar Holdings) on the 1st was to reduce the purchase price in exchange for waiving the debts Eastar Holdings must bear," and "The actual amount additionally attributed to Eastar Jet through the share donation is only in the 8 billion KRW range, not the 20 billion KRW publicly disclosed by the media."

◆ "Doubtful whether stable management is possible" = Jeju Air also criticized Eastar Jet for showing insincere behavior regarding the fulfillment of preconditions. Jeju Air said, "We have not received evidence that the payment guarantee for Thai Eastar Jet, one of the preconditions, has been resolved, and there are many other unclear preconditions," adding, "If the deal is closed under the current circumstances, Jeju Air will have to bear unpaid debts of about 170 billion KRW and future liabilities."

Jeju Air continued, stating that it has resolved all preconditions it must fulfill (fund lending, overseas corporate merger review, convertible bond issuance), and emphasized, "Various allegations recently reported by Eastar Jet raise serious concerns about the legitimacy of the shares to be purchased through the acquisition contract," and "We doubt whether stable management is possible."

Jeju Air concluded, "We already demanded Eastar Jet on the 1st to resolve the preconditions within 10 business days and clearly stated that the contract could be terminated if not fulfilled," and "We are currently waiting for Eastar Jet's response."

This content was produced with the assistance of AI translation services.