Eastar Jet Struggles to Avoid Resale, Restructuring Also Intensifies

Company Plans to Lay Off 800 to 900 Employees

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's headquarters in Gangseo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Yoo Je-hoon] After the collapse of the merger and acquisition (M&A) with Jeju Air, Eastar Jet is making desperate efforts to resell the company. Recently, the company is also moving toward full-scale restructuring, including plans to lay off about 700 employees.

According to industry sources on the 22nd, Eastar Jet recently selected accounting firm Deloitte Anjin, law firm Yulchon, and Heungkuk Securities as sales agents and is discussing acquisition issues with about two private equity funds (PEFs).

The company is reportedly planning to approach private equity funds for acquisition after due diligence, then seek strategic investors (SIs), and proceed with the rehabilitation process early next month. An industry insider said, "If they apply for court receivership as is, it will be difficult to be accepted," adding, "To increase the possibility of rehabilitation, an acquirer must be confirmed."

In this process, Eastar Jet has decided to proceed with workforce restructuring. New investors are demanding downsizing of equipment and personnel, and the accumulating unpaid wages could negatively affect acquisition and rehabilitation.

Accordingly, Eastar Jet is planning to provide a restructuring list by the 31st of this month and lay off employees effective September 30. The scale is expected to be about 70% of the total 1,300 employees. However, the company is known to have promised 100% reemployment once the resale is successful and management normalizes.

At the same time, the company is reportedly considering resuming domestic flights through rehabilitation loans even if court receivership proceeds.

However, despite these developments, the industry explains that the internal and external management environment is difficult to foresee, as the novel coronavirus disease (COVID-19) is showing signs of resurgence. An LCC industry official said, "Finding an appropriate investor and succeeding in rehabilitation would be the best scenario for both employees and the company, but given the prolonged COVID-19 situation, whether it can proceed smoothly is uncertain."

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