This photo taken on Nov. 18, 2020, shows Korean Air Chairman Cho Won-tae receiving questions from reporters on the company’s plan to acquire Asiana Airlines after attending the 32nd Korea-U.S. business leaders’ meeting at the Federation of Korean Industries building in Yeouido, Seoul. (Yonhap)
SEOUL, Nov. 18 (Korea Bizwire) — Korean Air Lines Co., South Korea’s biggest carrier, will proceed with the deal to acquire its smaller local rival Asiana Airlines Inc. without job cuts, the company’s chairman said Wednesday.
“The company made a decision to acquire (Asiana Airlines) to make a contribution to the development of the country’s airline industry,” Korean Air Chairman Cho Won-tae told reporters after attending a South Korea-U.S. business leaders’ meeting in Seoul.
Korean Air and Asiana have redundant routes and workforce. But it is possible to utilize all the routes and workers if an integrated company expands routes and diversifies business, he said.
Cho rejected allegations that the government gave a special favor for the deal.
He said the state-run Korea Development Bank (KDB), the main creditor of Asiana, first asked him if he has an interest in acquiring Asiana and , “I said yes. We met several times to initiate the deal.”
His remarks came a day after the KDB signed an agreement with Hanjin KAL Corp., the owner of Korean Air, to inject 800 billion won (US$723 million) into the parent firm through a rights offering and convertible bonds.
Hanjin KAL will then participate in a 2.5 trillion-won stock sale by Korean Air that will used to acquire Asiana.
Korean Air plans to raise 2.5 trillion won via rights offering early next year. Of the proceeds, it will spend 1.5 trillion won to buy new shares to be sold by Asiana and 300 billion won worth of Asiana perpetual bonds.
KDB will have a 10.66 percent stake in Hanjin KAL after investing the 800 billion won in the holding firm and is widely expected to help Chairman Cho and his related parties in fending off offensives from an activist fund attempting to take control of its stake in Hanjin KAL.
Cho also serves as chairman of Hanjin KAL, the holding firm of airline conglomerate Hanjin Group.
The 44-year-old chairman had sparred with his elder sister Hyun-ah, 45, as she formed an alliance with homegrown equity fund Korea Corporate Governance Improvement (KCGI) and local builder Bando Engineering & Construction Co. in January.
The alliance argued that inviting a professional manager would help improve Hanjin Group’s management, financial status and shareholder value.
But the three-party alliance failed to dethrone the chairman and is widely expected to make another attempt at Hanjin KAL’s shareholders meeting in March next year.
The alliance has recently increased its combined stake in Hanjin KAL to 46.71 percent, higher than the 41.3 percent held by Won-tae, his mother, younger sister, related parties, Delta Air Lines, Inc. and Kakao Corp., the operator of the country’s leading messaging app.
On Wednesday, the KCGI filed an injunction against the KDB’s plan to participate in Hanjin KAL’s rights offering on the grounds that the share sale to the designated third party will damage the holding firm’s existing shareholders’ value.
This photo, taken on Nov. 15, 2020, shows Korean Air and Asiana planes at Incheon International Airport, just west of Seoul. (Yonhap)
Hit hard by the COVID-19 pandemic, airlines have suspended most of their flights on international routes since March and have struggled with poor earnings results as travel demand dried up.
South Korea’s antitrust regulator will review the deal over the issue of monopoly. If things go smoothly, the deal is expected to be completed by June next year.
Asked about the possibility that the integrated airline will sharply raise airfares using its monopolistic position after acquisition, the chairman said, “There may be such concerns in the markets but there will be no sharp increase in airfares.”
The majority 30.77 percent stake in Asiana is currently held by Kumho Industrial Co., an affiliate of airline-to-petrochemical conglomerate Kumho Asiana Group.
Korean Air, currently the world’s 18th-largest airline by fleet, will become Asiana’s biggest shareholder with a 63.9 percent stake if the acquisition is completed.
Korean Air and Asiana collectively have 247 aircraft, exceeding Air France’s 220 and falling slightly behind Lufthansa Deutsche Lufthansa AG’s 280.
Korean Air had 22.46 trillion won in debt on assets worth 25.51 trillion won as of the end of September, while Asiana held debts worth 11 trillion won on assets worth 12.34 trillion won at the end of June.
In the process of the deal, Asiana’s heavy debts remain a major worry for Korean Air.
On Wednesday, Hanjin KAL fell 0.4 percent to 74,600 won, Korean Air declined 2.7 percent to 23,900 won and Asiana Airlines plunged 10 percent to 5,220 won on profit taking, all underperforming the broader KOSPI’s 0.3 percent gain.
(Yonhap)
