Jeju Air "Abandons Acquisition of Eastar" Eastar "Does Not Accept"

First Restructuring Attempt in Aviation Industry Fails
"All Measures Will Be Taken to Respond" Legal Battle Foreseen

On the 23rd, when Jeju Air announced the termination of the stock purchase agreement for acquiring management rights of Eastar Jet, effectively giving up the acquisition, a sense of silence prevailed at Eastar Jet headquarters in Gangseo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Yu Je-hoon] Jeju Air has officially declared the failure of its acquisition and merger (M&A) of Eastar Jet. As a result, the merger of the two airlines, which had attracted attention as the first restructuring attempt between domestic airlines, has fallen through after about seven months of discussions. Eastar Jet has announced that it will respond by all means and has also warned of legal disputes, but concerns about Eastar Jet's bankruptcy and the mass unemployment of 1,600 employees are expected to become a reality.

Jeju Air announced on the 23rd that it would terminate the Stock Purchase Agreement (SPA) with Eastar Holdings signed on March 2. Eastar Holdings is a holding company that owns 39.6% of Eastar Jet's shares. This comes about seven months after signing a Memorandum of Understanding (MOU) for the SPA last December. Jeju Air explained the reason for termination as "significant breaches of representations and warranties (non-fulfillment of conditions precedent) and expiration of the transaction closing period," adding, "Despite the government's active support and mediation efforts, we judged that the uncertainties to be borne in forcibly proceeding with the acquisition under the current circumstances are too great."

With Jeju Air giving up the acquisition, Eastar Jet, which opened in 2007, is now facing the risk of closure after 13 years. Eastar Jet's total capital in the first quarter of this year was -14.2 billion KRW, making recovery on its own impossible. Internally, Eastar Jet is seeking a third-party buyer and is hoping for support from Jeollabuk-do, a regional base, similar to the case of Fly Gangwon, but it is reported to be difficult. Because of this, the industry expects that Eastar Jet is likely to apply for court receivership and proceed with liquidation. In this case, the 1,600 Eastar Jet workers could also face unemployment.

Eastar Jet is in a tense atmosphere. A key Eastar Jet official said, "We cannot accept Jeju Air's announcement today," emphasizing, "The resolution of unpaid amounts is not a precondition for the acquisition according to the SPA contract." The official added, "Jeju Air must fulfill the contract without fail," and "If they do not comply, we will respond by all means."

Accordingly, the two companies are likely to enter into legal battles over the return of the performance bond (11.5 billion KRW) paid by Jeju Air to Eastar Jet and responsibility for the shutdown. It is already reported that both sides are preparing for this through law firms.

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