Will Lee Dong-geol's 'Big Deal' Succeed... Korean Air-Asiana's 'Day of Destiny' Approaches

As Korean Air's acquisition of Asiana Airlines is underway, on the 17th, Korean Air and Asiana Airlines passenger planes are parked behind the construction site of the 4th runway at Incheon International Airport. 2020. 11. 17

[Asia Economy Reporter Kangwook Cho] The fateful day to determine whether Korean Air will acquire Asiana Airlines is fast approaching. The result of the provisional injunction filed by the private equity fund KCGI against Hanjin KAL to prohibit the issuance of new shares is expected as early as the 30th. Attention is focused on whether this deal, pushed forward by Industrial Bank of Korea Chairman Dong-geol Lee for the normalization of the aviation industry despite controversy over chaebol favoritism, can succeed.

According to related industry sources on the 29th, the Seoul Central District Court Civil Division 50 (Chief Judge Seung-ryeon Lee) is expected to reach a conclusion tomorrow (the 30th) or on the 1st of next month regarding KCGI's provisional injunction request to prohibit the issuance of new shares by Hanjin KAL.

Earlier, KCGI filed the injunction seeking to nullify the issuance of new shares in Hanjin KAL’s third-party allotment rights issue involving the Industrial Bank of Korea.

KCGI argues that under the current structure, the acquisition of Asiana Airlines is possible solely through the issuance of non-voting preferred shares or loans.

The court concluded the injunction hearing on the 25th and has begun a full legal review. The court identified key issues in this case as the legitimacy of the purpose of the new share issuance and whether alternatives to the issuance exist.

Since the payment date for the third-party allotment rights issue by Hanjin KAL to the Industrial Bank of Korea is on the 2nd of next month, a decision must be made by the 1st at the latest. If the court grants the injunction, Korean Air’s acquisition of Asiana Airlines is likely to be nullified.

For this reason, the Industrial Bank of Korea has been vocally emphasizing that this is an integration for the survival of the aviation industry. Especially with Japan reportedly preparing for airline consolidation, there are concerns that if Hanjin KAL’s rights issue fails, the entire aviation industry could collapse.

In fact, in Japan, discussions about the merger of the two major airlines, All Nippon Airways (ANA) and Japan Airlines (JAL), have been circulating. However, since the government-led restructuring combining Korean Air and Asiana Airlines began first, similar discussions are now emerging in Japan. The merger talks between ANA and JAL flared up significantly back in 2009.

Nevertheless, controversy remains in the market. There are suspicions that the Industrial Bank of Korea’s participation in Hanjin KAL’s rights issue is aimed at protecting Chairman Cho Won-tae’s management rights. While the purpose of restructuring the aviation industry is understood, questions remain as to why Hanjin KAL specifically.

Chairman Lee stated on the 16th, when he first announced the plan to sell Asiana Airlines to the Hanjin Group, that a rights issue to Hanjin KAL was inevitable to maintain the Hanjin Group’s holding company structure.

In an online briefing on the 19th, he urged, "Please view the situation objectively and calmly without political bias," emphasizing, "Although aware of the allegations of chaebol favoritism, this is a realistically unavoidable choice."

On the 23rd, the Industrial Bank of Korea highlighted in a press release that participating as a shareholder in Hanjin KAL is essential to faithfully perform the role of monitoring the Hanjin Group’s sound and ethical management.

To monitor whether the Hanjin Group’s promises, such as the employment succession of all Asiana Airlines employees, are properly fulfilled, the Industrial Bank of Korea must secure means to check the management of Hanjin KAL, including Chairman Cho.

Furthermore, on the 26th, the bank reiterated that the restructuring plan for the aviation industry is being pursued while adhering to three principles: responsible roles of major shareholders, sharing of pain by stakeholders, and preparation of sustainable normalization measures, aiming for the integration of the two major national airlines.

The Asiana Airlines labor union and the Asiana pilots’ union are reportedly preparing criminal lawsuits against Chairman Lee. They claim that his repeated statements suggesting that Asiana Airlines is on the verge of bankruptcy, while emphasizing the necessity of Korean Air’s acquisition, have seriously harmed the company’s existence, and plan to sue him on charges including extortion and threats.

The Industrial Bank of Korea has publicly requested dialogue with the Asiana Airlines labor union, the Asiana Airlines pilots’ labor union, and the Asiana Airlines open pilots’ labor union.

However, in response, the joint countermeasure committee of the four unions of Asiana Airlines and Korean Air stated that this is merely an attempt to build justification ahead of the court’s provisional injunction decision.

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