Eastar Jet M&A Resumes in Search of New Owner... Turmoil Over 700 Job Cuts

[Asia Economy Reporter Kim Hyewon] Eastar Jet has resumed its journey to find a new owner.

According to industry sources on the 30th, Deloitte Anjin Accounting Corporation, Yulchon LLC, and Heungkuk Securities, who are in charge of the sale of Eastar Jet, plan to send letters of intent to preliminary investors within this week.

Earlier, on the 28th, Eastar Jet held a kickoff meeting with the sale management team to review the schedule and progress related to the resale.

After sending the letters of intent, Eastar Jet plans to proceed with selecting a preferred negotiator, signing a memorandum of understanding (MOU), and, as early as late September or October, file for court receivership.

Regarding the Eastar Jet merger and acquisition (M&A), which previously fell through once with Jeju Air, it is reported that several large funds and companies have expressed investment intentions.

If Eastar Jet attracts new investors as planned and enters the court receivership process, it is expected that through DIP financing, it will recover its Air Operator Certificate (AOC) and resume domestic flights around October to November. To renew the suspended AOC and resume operations, a request must be submitted to the Ministry of Land, Infrastructure and Transport at least three weeks in advance.

Members of the Korean Confederation of Trade Unions Public Transport Workers' Union and the Eastar Jet Pilots' Union held a press conference on the 29th at the Southern District Prosecutors' Office in Yangcheon-gu, Seoul, to file a complaint against Lee Sang-jik, a member of the Democratic Party of Korea, and his family. Considering the ongoing uncertainty surrounding the M&A, they had been weighing the timing, but following the final cancellation of the Stock Purchase Agreement (SPA) with Jeju Air last week, they decided to report to the prosecution on suspicions of illicit succession involving his children and various paper company allegations. Photo by Kim Hyun-min kimhyun81@

Along with the resumption of the M&A process, Eastar Jet is conducting workforce reductions of about 700 employees, creating a turbulent internal atmosphere. Since the 28th, Eastar Jet has been accepting voluntary retirement applications from regular employees. On the 7th of next month, the list of employees subject to layoffs will be announced.

In this regard, the Eastar Jet Pilots Union urged, "The workforce reduction plan, which is at the level of dismantling the company, should be withdrawn, and at least minimal efforts must be made to maintain employment."

According to the union, Eastar Jet management plans to return 8 additional aircraft following the return of 9 aircraft in the first half of this year and operate only 6 aircraft. Along with this, they plan to reduce the current workforce of 1,136 by an additional 700, bringing it down to about 400 employees. If layoffs proceed as planned by management, only about one-quarter of the approximately 1,600 employees as of March will remain with the company.

The union claimed, "Eastar Jet owner and Democratic Party lawmaker Lee Sang-jik and management have not presented any measures to resolve the seven months of unpaid wages," and "They also ignored the union's request to apply for employment retention subsidies, citing the burden of a small cost." They further requested, "The government should not leave this solely to the owner and management but actively exercise supervisory authority and provide support."

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