Korean Air now has the funding in place to acquire Asiana after raising nearly $3 billion in capital by issuing new shares.
Korean Air Obtains Funding For Asiana Acquisition
In November, Korean Air announced it would acquire Asiana airlines in a deal worth $1.6 billion. COVID-19 initially hit South Korea hard and both Korean Air and Asiana had been struggling prior to the pandemic.
The deal would merge Asiana into the Korean Air brand and many overlapping routes would be deleted. Since November, Korean Air has obtained the consent of its majority of shareholders to acquire Asiana and is now waiting on final government approval. The South Korean Fair Trade Commission (FTC) is reviewing the application and will render its decision within 90 days.
The Korea Herald noted:
“The carrier plans to make a payment to acquire a controlling stake in Asiana Airlines by June 30, and to spend some 1.8 trillion won to pay debts, including financial leases and aircraft-backed loans, between April and December, according to the company’s filing.”
Combined, the new Korean Air would operate about 60% of international routes to/from South Korea.
While Korean Air has indicated that it intends to keep as many employees as possible, it is difficult to see how the synergies and merger makes sense unless there is consolidation and a trimming of the combined workforce, especially due to lingering border closures and depressed demand from the pandemic.
The hope is that Korean Air’s acquisition of Asiana will stabilize the Korean airline industry. While that remains an open question, the merger will likely create additional stability. It will likely come at the expense of consumers, though. Asiana and Korean Air maintained above-average onboard products because they were competing with one another for business. With that competition eliminated, we may see a decline in both innovation and quality onboard. But the merger is now one step closer to becoming a reality.
image: Hyeonwoo Noh