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Korean Air Parent Company Hanjin Group to Acquire Asiana Airlines for $1.62 Billion

Hanjin Group KAL and Korean Air agreed to acquire the financially troubled carrier for KRW 1.8 trillion (US $1.62 billion) at a board meeting on Monday. Korean Air will issue new shares to raise KRW 2.5 trillion (US$2.8 billion) early next year.

Asiana Airlines Airbus A350XWB - Courtesy Airbus

On Monday (November 16, 2020), Korean Air’s parent company, Hanjin Group, announced that the company will acquire financially troubled Asiana Airlines for KRW 1.8 trillion (US$1.62 billion). Korean Air plans on raising KRW 2.5 trillion (US$ 2.8 billion) in new capital to support the deal by issuing new shares in early 2021. In an agreement with the Korea Development Bank, Hanjin KAL will receive a KRW 800 billion (US $722 million) investment by issuing KRW 500 billion in new shares to the bank (via third-party allotment) as well as KRW 300 billion in exchangeable bonds. The investment is meant to provide support for both airlines prior to Korean Air’s capital increase. Korean Air will invest KRW 300 billion to acquire perpetual convertible bonds from Asiana Airlines and another KRW 300 billion as a down payment for the KRW 1.5 trillion contract to acquire Asiana Airlines’ new shares. Today’s announcement from the Hanjin Group stated, in part,

“Given the crisis the airline industry is currently facing, it is unavoidable to restructure the entire market, including Korean Air, Asiana Airlines, the low cost carriers such as Jin Air, and relevant industries. Korea Development Bank’s shares will be ordinary shares with a voting right, and Korea Development Bank will monitor and make sure Hanjin KAL and Korean Air follow through with acquisition plans.

“The main reason behind Korean Air’s decision to acquire Asiana Airlines at this time is to stabilize the Korean aviation industry, which is suffering from the COVID-19 pandemic. Considering that Korean Air’s financial status could also be endangered if the COVID-19 situation is prolonged, it is inevitable to restructure the domestic aviation market to enhance its competitiveness and minimize the injection of public funds.

“Korean Air decided to acquire Asiana Airlines after much consideration and deliberation in order to pursue its founding mission to contribute to the nation through transportation. Following its mission, the carrier will ensure job security for employees at both airlines as well as relevant industries and support the development of Korea’s aviation industry.”

Once the acquisition is complete, Korean Air is expected to rank among the top 10 airlines in the world. The elimination of domestic competition is expected to enhance Korean Air’s competitiveness with an expansion of routes, fleet, capacity and the addition of slots at Seoul’s Incheon International Airport.

Source: Hanjin Group


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