Logo of Phnom Penh Post newspaper Phnom Penh Post - Ministries to discuss Korean Air’s plan to buy rival Asiana

Ministries to discuss Korean Air’s plan to buy rival Asiana

Content image - Phnom Penh Post
South Korea’s Korean Air and Asiana planes sit on the tarmac at Gimpo airport in Seoul. AFP

Ministries to discuss Korean Air’s plan to buy rival Asiana

Following reports of Korean Air’s possible acquisition of Asiana Airlines, the government is set to hold a meeting on Monday to discuss the deal between South Korea’s flag carriers, according to financial industry sources on Sunday.

During a ministerial meeting presided over by the country’s chief of economy and industries, ways to normalise Asiana’s business are expected to be discussed, including reported plans by Hanjin Group, which owns Korean Air, to buy out its troubled rival.

Some local media outlets have speculated that a deal could be announced as early as sometime this week, though both airlines have declined to comment.

The central part of the discussion would be fairness of the acquisition of the two major airline companies of Korea, examining the probabilities of approval from the antitrust watchdog.

However, as speculation grows before the government’s meeting, private equity fund KCGI – a shareholder of Hanjin Kal – on Sunday said it wants to be in the driver’s seat in delivering the deal as it officially expressed opposition to the current plan once again.

“If Hanjin Kal insists on going ahead with a paid-in capital increase, our alliance offers to take part as a major shareholder as part of our responsible management efforts, instead of wasting taxpayers’ money by allocating it to a third party,” the fund said in a statement on Sunday.

On Friday, the KCGI branded the Korea Development Bank’s (KDB’s) consideration of acquiring Asiana Airlines by funding Hanjin Kal as a “measure to preserve the position of the current management, ignoring the rights of other shareholders.”

For the current chairman of Korean Air, Cho Won-tae, who faces a leadership challenge from a three-way alliance led by KCGI – alongside Bando Engineering & Construction, and his sister Cho Hyun-ah, also known as Heather Cho – which owns most shares, the acquisition deal could solidify his position.

If the deal comes to fruition, the industry will see one of the biggest airlines in the world, boasting a combined fleet of 259 aircrafts and assets worth 40 trillion won ($36 billion).

At home, the two airlines including their low cost carriers – Jin Air, Air Seoul and Air Busan – will account for over 62 per cent of the domestic flight market share, based on data from the Korea Airports Corporation last year.

Hurr Hee-young, a professor at Korea Aerospace University, pointed out that other markets of a similar size often have one national flag carrier such as Germany with Lufthansa and the UK British Airways.

“While the two major airlines have successfully co-existed in Korea, it appears that [the decision-makers] have now realised that one bigger airline might be better at competing with international airlines in terms of economies of scales,” he said.

Asiana Airlines is currently under creditor control after the acquisition talks with HDC Hyundai Development failed earlier this year.

With the industry beset by the ongoing pandemic, however, it has struggled to find a new buyer.

One likely scenario in which the deal could play out is for Hanjin Kal, the holding company of Hanjin Group, to buy a 30.77 per cent stake in Asiana Airlines from Kumho Industrial which currently owns a controlling stake in the airline.

The deal will also see the state-owned KDB, the troubled airline’s creditor, invest in Hanjin Kal through a paid-in capital increase method allocated to a third party.

But concerns that the move might disrupt market fairness could also mean the airlines could be forced to part ways with some of their budget airlines.

“With its high market share, it might be difficult to get approval for the deal from the Fair Trade Commission [FTC], which could force Asiana Airlines to sell its budget airlines or give up traffic rights,” professor Hurr said.

If the FTC approves the deal between the airlines as they are by determining that Asiana is not “recoverable” and therefore applying an exceptional clause of the antitrust law, the move could also face criticisms over using more taxpayer money to bail out corporations.

Both Asiana Airlines and Korean Air received 3.3 and 1.2 trillion won, respectively, from state-run banks earlier this year after the coronavirus pandemic devastated the aviation industry.



  • Research key to Kanitha’s rep for expertise

    Sok Kanitha is used to weighing in on controversial issues using a confident approach that signals expertise and authority, and a recent video she made was no exception. Her “Episode 342: The History of NATO” video went live on January 16, 2023 and immediately shot to 30,000 likes and 3,500

  • Cambodia maintains 'Kun Khmer' stance despite Thailand’s boycott threat

    Cambodia has taken the position that it will use the term "Kun Khmer" to refer to the sport of kickboxing at the upcoming Southeast Asian (SEA) Games, and has removed the term Muay from all references to the sport. Despite strong reactions from the Thai

  • Knockout! Kun Khmer replaces ‘Muay’ for Phnom Penh Games

    Cambodia has decided to officially remove the word Muay from the programme of the 32nd Southeast Asian (SEA) Games 2023 in May. “Kun Khmer” will instead be used to represent the Southeast Asian sport of kickboxing, in accordance with the wishes of the Cambodian people. Vath

  • Artificial insemination takes herd from 7 to 700

    Some farms breed local cows or even import bulls from a broad for the purpose of breeding heavier livestock for meat production. One Tbong Khnum farmer has found a more efficient way. Hout Leang employs artificial insemination to fertilise local cows. Thanks to imported “straws”

  • New int’l airport nearly half complete as travel industry returns to life

    Construction of a new airport that is slated to serve the capital has passed the 43 per cent completion mark, raising prospects for a proper recovery in the civil aviation and tourism sectors as international travellers return to the Kingdom in increasingly large numbers. The figure

  • Chinese group tours return to Cambodia starting Feb 6

    Cambodia is among 20 countries selected by Beijing for a pilot programme allowing travel agencies to provide international group tours as well as flight and hotel packages to Chinese citizens, following a three-year ban. As the days tick down until the programme kicks off on February 6,