Hanjin Group has decided to take over Asiana Airlines after its holding company Hanjin KAL and Korean Air held a board of directors’ meeting on Nov. 16, respectively.
Its acquisition of Asiana Airlines, made at a time when the global aviation industry is facing an unprecedented crisis due to the COVID-19 and it is expected to signal a realignment of the domestic airline industry.
Korean Air will need a total of 1.8 trillion won ($1.6 billion) to acquire Asiana Airlines, and it plans to raise the fund through a 2.5 trillion won ($2.2 billion) paid-in capital increase early next year.
Under the deal with KDB, Hanjin KAL will secure a total of 800 billion won in fund, including 500 billion won in third-party allocated capital increase and 300 billion won through the issuance of exchange bonds, to participate in the capital increase of Korean Air.
Hanjin KAL will lend the entire 800 billion won ($708 million) to Korean Air immediately after the KDB investment so that Korean Air and Asiana Airlines can use the funds to overcome the COPVID-19 crisis even before the capital increase.
With the funds, Korean Air will acquire 300 billion won in permanent convertible bonds of Asiana Airlines and cover 300 billion won in down payment for 1.5 trillion won in funds to buy new shares.
Once Korean Air completes its acquisition of Asiana Airlines, it is expected to become the world's top 10 global network carrier. Most countries with a population of less than 100 million have only one network airline.
So far, Korea has been a relative inferiority in competition with airlines from major advanced countries such as Germany, France, Hong Kong and Singapore with multiple systems. The acquisition, however, will pave the way for Korean Air to compete with global mega carriers in key indicators such as route networks, aircraft and supply size.
First of all, it is expected to further enhance the competitiveness in the aviation industry by streamlining the operation of routes and reducing costs, a Korean Air official said.
