Korean Air acquires Asiana Airlines for US$1.6-billion

Aviation Updates Philippines – On Monday, the South Korean flag carrier Korean Air announced the 1.8 trillion won (US$1.6 billion) acquisition of Asiana Airlines as part of humongous efforts to stabilize the aviation industry amid the COVID-19 pandemic economic recession. 

"The acquisition of Asiana Airlines is expected to be a signal of a reshaping of the domestic aviation industry, as the world's aviation industry is in crisis due to the Corona 19 incident," a translated statement of Korean Air reads.

The flag carrier plans to raise 2.5 trillion won in shares early next year to raise funds for the acquisition project. Hanjin KAL, Korean Air's parent company, will invest 800 billion won through the issuance of exchange bonds, as part of an agreement with government-backed Korea Development Bank.

The new funding from its parent will enable Korean Air to buy 300 billion won worth of perpetual convertible bonds in Asiana Airlines, and at the same time, to pour in another 300 billion won as a downpayment for new Asiana shares worth 1.5 billion won.

"In this way, Asiana Airlines will be able to secure operating funds by the end of the year, as well as to improve its financial structure by expanding its capital to 30 billion permanent bonds."

According to Korean Air, the merger of the two airlines will boost the duo as the 10th largest airline in the world in terms of fleet numbers. 

The acquisition will eventually stabilize the Korean aviation industry, noting the fact that South Korea has two operating full-service carriers and a handful of low-cost carriers. After the buyout, it will hopefully enable the carrier to compete with "global supersized" airlines with its route network, fleet, and capacity.