Hanjin Group Resolves to Acquire Asiana Airlines: "Aiming to Become a Top 10 Global Airline"

"Minimizing Public Fund Injection to Strengthen Competitiveness of the Aviation Industry"

[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] Hanjin Group has resolved to acquire Asiana Airlines. Hanjin Group plans to leverage this acquisition to become one of the world's top 10 global network airlines.

According to Hanjin Group on the 16th, Hanjin Kal and Korean Air each held board meetings this morning and decided to acquire Asiana Airlines. The total funds required for Korean Air to acquire Asiana Airlines amount to 1.8 trillion KRW, and the acquisition payment will be raised through a 2.5 trillion KRW rights offering early next year.

In accordance with the contract with KDB Industrial Bank, Hanjin Kal will secure a total of 800 billion KRW by issuing 500 billion KRW through a third-party allotment rights offering and 300 billion KRW through exchangeable bonds, participating in Korean Air's rights offering. Even before the rights offering, 800 billion KRW will be lent to both companies to help overcome the COVID-19 crisis.

Korean Air plans to use these funds to acquire 300 billion KRW of Asiana Airlines' perpetual bonds and cover the 300 billion KRW deposit for the 1.5 trillion KRW new share subscription payment. In this case, Asiana Airlines will secure operating funds by the end of the year and improve its financial structure by increasing capital with the 300 billion KRW perpetual bonds.

The company explained that the reason KDB Industrial Bank chose to invest in Hanjin Kal is that by Hanjin Kal participating in Korean Air's rights offering, it can maintain its stake in Korean Air and operate a stable holding company system. Hanjin Kal also plans to proceed with a third-party allotment rights offering to quickly and reliably raise capital, considering that borrowing the entire 800 billion KRW from KDB Industrial Bank could worsen its financial structure and the urgency of the matter.

Hanjin Group stated, "The main reason for deciding to acquire Asiana Airlines this time is to quickly stabilize the domestic aviation industry, which is on the brink of collapse due to COVID-19," adding, "The background for this deal is the judgment that fundamental competitiveness must be secured through restructuring the aviation industry to minimize additional public fund injections and reduce the burden on the public."

Meanwhile, the industry expects that once Korean Air completes the acquisition of Asiana Airlines, it will rise to become a top 10 global airline. The integration of the two companies will strengthen the profit base through route operation rationalization and cost reduction, and by expanding the slot share at the hub airport, Incheon Airport, it will actively attract overseas transfer demand by expanding joint ventures (JVs) with global airlines.

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