Ministerial Industry Meeting on the 16th... Announcement Expected on Korean Air-Asiana Acquisition 추진

[Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] An announcement regarding Hanjin Group's plan to acquire Asiana Airlines, which is owned by Korean Air, is expected to be made early this week.

With Korea's first and second largest airlines, Korean Air and Asiana Airlines, coming under 'one roof,' the birth of a mega airline is imminent. However, since this plan is being pursued on the premise of the Fair Trade Commission's approval of the corporate merger, judging Asiana Airlines as a company beyond recovery, there is controversy over additional public fund injections. This is because the state-run Korea Development Bank (KDB) would inject more public funds to save a company deemed unrecoverable.

According to financial circles on the 15th, the government plans to hold a meeting of the Ministers for Industrial Competitiveness Enhancement (San-gyeong-jang) on the 16th to discuss the normalization plan for Asiana Airlines. The acquisition of Asiana Airlines by Hanjin Group is a key agenda item, with a plan being considered for Hanjin Group to acquire Asiana Airlines with financial support from KDB.

The plan involves investing funds into Hanjin KAL, at the top of Hanjin Group's governance structure, through a third-party allotment of paid-in capital, allowing Hanjin KAL to purchase Asiana Airlines shares (30.77%) held by Kumho Industrial. Essentially, this means KDB participates as a financial investor in the acquisition, thereby reducing Hanjin KAL's acquisition burden.

Another scenario being discussed is separating the MRO (Maintenance, Repair, and Overhaul) organizations of Korean Air and Asiana Airlines to create a separate corporation. The idea of Korean Air acquiring Asiana Airlines is known to have originated from KDB. This is a desperate measure that emerged while contemplating normalization plans after the collapse of HDC Hyundai Development Company's acquisition of Asiana Airlines in September.

Especially as the COVID-19 pandemic has prolonged, pushing the aviation industry to the brink of crisis, there is a strong perception that continuing government support for two large airlines is not reasonable. Asiana Airlines exhausted 3.3 trillion KRW in support from KDB and the Export-Import Bank and subsequently received an additional 240 billion KRW from the Industrial Stabilization Fund. Korean Air also received 1.2 trillion KRW in support from KDB and the Export-Import Bank in April this year, and an application to the Industrial Stabilization Fund is also anticipated.

Amid the uncertain outlook for the aviation industry, the plan to merge the two major airlines is said to have gained consensus within the government. This plan is expected to be announced by the government or KDB and is likely to be disclosed after the San-gyeong-jang meeting on the 16th. Hanjin KAL, the holding company of Hanjin Group, is also reported to hold a board meeting on the 16th to discuss the acquisition of Asiana Airlines.

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