Korean Air to Buy Rival Asiana

      November 16, 2020 13:39

      Korean Air will acquire rival Asiana Airlines to become one of the world's biggest airlines. A ministerial meeting on Monday gave the green light for the flag carrier's bid to go ahead despite monopoly concerns.

      Asiana's main creditor, state-run Korea Development Bank, will inject W500 billion by buying shares in Korean Air parent company Hanjin's holding firm, Hanjin KAL, and W300 billion in exchangeable bonds.

      Once the merger is complete, KDB will become a major shareholder of Hanjin KAL. The main obstacles are disgraced Hanjin heiress Cho Hyun-ah and her posse of corporate raiders, who are embroiled in a dispute with her brother, Hanjin chairman Cho Won-tae, over control of the conglomerate.

      /Newsis

      Cho and her allies together now own 46.7 percent of Hanjin KAL, which is more than the chairman's 41.1 percent. If KDB becomes a major shareholder of Hanjin KAL, Cho and her allies would lose their controlling stake in the conglomerate, so they are revving up to take legal action should they be excluded from the capital increase.

      Anti-trust issues are another problem. Korean Air and Asiana together account for 42.2 percent of the domestic airline industry, but that rises to 62.5 percent when their budget subsidiaries Air Seoul, Air Busan and Jin Air are included.

      A company is considered a monopoly if it accounts for more than a 50 percent share of any market, so Asiana must prove to the Fair Trade Commission that it is close to falling over the edge and financially "irrecoverable." That means Korean Air and Asiana will probably have to sell or merge their budget carriers.

      Another obstacle could be resistance from their six labor unions. Unionized workers gathered on Monday to discuss their plan of action, but a source from Korean Air's union said they "basically oppose" the deal. "We will announce our position after gathering the opinions of union members," the source added.

      KDB president Lee Dong-gull is to meet with Cho Won-tae later this month, but both government officials and creditors have already said they cannot guarantee Cho's control over Hanjin.

      "Even chairman Cho could be ousted if any mismanagement is found," a government source said. "If the creditors become shareholders of Hanjin KAL, all decisions will be made dispassionately."

      • Copyright © Chosunilbo & Chosun.com
      Previous Next
      All Headlines Back to Top