MIAMI – Korean Air Lines (KE) has announced its plans to acquire Asiana Airlines (OZ). If the purchase is completed, KE would become the 10th-biggest airline in the world by fleet size.

According to KE Chairman Cho Won-tae, the company made the purchase decision to help the country’s airline industry continue to grow. Additionally, the move will minimize the injection of public funds into OZ.

The indebted airline is worth ₩1.8tn. KE will therefore spend ₩1.5tn to acquire shares in the ailing airline. After this initial investment, the former will invest ₩300bn worth of OZ perpetual bonds.

Apart from this operation, the state-run Korea Development Bank (KDB), which operates as the main creditor of OZ, will inject ₩800bn into the KE’s parent firm Hanjin KAL. This will be via the offering of rights and convertible bonds along with the participation of ₩2.5tn worth from the sale of the stock.

File:Asiana Airlines, A380-800, HL7634 (17765412761).jpg - Wikimedia Commons
Photo: Wiki Commons

Major Impact on Low-Cost Operations

Regarding this joint-operation, the Korean deputy minister for Civil Aviation at the Ministry of Land, Infrastructure and Transport Kim Sang-do said that it was an “inevitable decision.” As KE and OZ are Korea’s two biggest airlines, the deal would prevent them from making bigger losses amid the ongoing pandemic.

Korean Air still awaits the approval of the country’s antitrust regulator. If it gets the green light, the deputy minister confirmed the operation would be effective later 2021.

This week, the Hanjin Group will submit a letter of intent to the KDB to proceed with the operation, reported The Korea Herald.

As a result of the acquisition, KE will also become OZ’s biggest shareholder with a 63.9% stake. Currently, KE is the 18th-largest airline in the world. With the deal, KE will additionally integrate three low-cost carriers. These include Jin Air (LJ), Air Busan (BX), and Air Seoul (RS) through KE and OZ businesses.

So far, the KE’s Chairman said the company will prioritize the job security of current employees of both companies.

Featured photo: Korean Air. photo; Photo: Nick Sheeder/Airways