November 14, 2020 | aviation

Asiana Airlines shares surge on potential deal with Korean Air’s owner

SEOUL: Shares in Asiana Airlines Inc soared on Friday on prospects that the owner of larger rival Korean Air Lines Co Ltd could buy a hefty stake in the debt-laden, pandemic-hit carrier.
Hanjin Kal said on Friday that it is considering buying a stake in Asiana, while Asiana’s state-run creditor said the deal was one of the options it was considering. Hanjin Kal is expected to hold a board meeting on Monday and submit a letter of intent to Asiana early next week, Yonhap News Agency said. A deal would provide a lifeline for Asiana, which employs some 9,000 people and was restructuring heavily even before debt ballooned due to the coronavirus pandemic.
In return, Korean Air, the country’s biggest airline, would see competition from South Korea’s only other full service carrier fade. It also would gain a valuable ally in Asiana’s creditor Korea Development Bank (KDB), as it seeks to fend off an activist shareholder from gaining control of its holding company Hanjin Kal.
According to media reports, Hanjin Kal is likely to issue new shares under the deal to purchase 30.8 per cent of Asiana held by construction company Kumho Industrial Co Ltd. KDB would then buy the new shares and become a major shareholder in Hanjin Kal. “From Hanjin Kal’s standpoint, it could find no better ally than KDB,” said Um Kyung-a, an analyst at Shinyoung Securities.
“And if the two airlines merge, the country’s aviation industry also benefits from the consolidation as too often there has been more supply than demand,” she said. Asiana and Kumho Industrial declined to comment.
Kumho said in September that its plan to sell control of Asiana to Hyundai Development Co for about 2.5 trillion won ($2.1 billion) had fallen apart. Shares in Asiana jumped nearly 8 per cent on Friday, valuing it at around $860 million. The carrier is saddled with some $11.5 billion in debt and saw talks with another group collapse in September due to the pandemic. It operates 29 passenger routes and had 72 passenger aircraft of June. Prior to the pandemic, it was operating 85 passenger routes.


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