Seoul, Nov 16 (efe-epa).- South Korea’s largest airline, Korean Air, is to buy its domestic rival, Asiana Airlines, for approximately 1.8 trillion won (about $1.46 billion), its parent company Hanjin KAL announced Monday.
“Once Korean Air completes its acquisition of Asiana Airlines, the airline is expected to be ranked as one of the top 10 airlines in the world,” Hanjing KAL said in a statement.
In order to secure the 1.8 trillion won, “Korean Air plans to increase KRW 2.5 trillion worth of capital by issuing new shares early next year,” it said.
Hanjin KAL will receive an 800-billion-won investment from the Korea Development Bank, which it will lend to Korean Air. With this, Korean Air plans to acquire 300 billion won in perpetual convertible bonds from Asiana and put 300 billion won into a down payment on a 1.5-billion-won contract to acquire Asiana shares.
“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,” Hanjin KAL said.
It added that it intends to “ensure job security for employees at both airlines as well as relevant industries and support the development of Korea’s aviation industry.”
The expansion plan of Korean Air, currently the 28th largest company in the world, also involves integrating into its structure three low-cost companies, Jin Air, which is owned by Hanjin KAL, as well as Air Busan and Air Seoul, both owned by Asiana.
“The deal between the top two airlines of Korea will be a great momentum to restructure the Korean aviation market amid the unprecedented crisis faced by the global aviation industry due to COVID-19,” Hanjin KAL said.
“In general, countries with a population less than 100 million have a single full service carrier. However, Korea has two full service carriers, which gives it a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline,” it added.
“However, Korean Air’s acquisition and the expansion of its routes, fleet and capacity will give the airline the competitiveness to compete with global mega airlines.”
It is expected that customers will benefit from a wider range of routes and schedules, and more transfer options. EFE-EPA