Korean Air’s Acquisition of Asiana Will Create a New Top-10 Airline

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Korean Air Asiana

Korean Air’s Acquisition of Asiana Will Create a New Top-10 Airline

Korean Air could soon become one of the world’s top 10 airlines after South Korea’s two biggest airlines plan to merge. Korean Air Lines is looking to acquire Asiana Airlines for $1.6 billion following an injection via its parent, Hanjin Kal Corp. The deal could be finalized in the second half of 2021. Financial transactions could actually be completed this year, but approvals from antitrust bodies globally could take longer.

Bloomberg says the main goal of the acquisition is to stabilize South Korea’s aviation industry amid the coronavirus pandemic and improve its competitiveness. “In general, countries with a population less than 100 million have a single full service carrier,” Hanjin said in a statement. “However, Korea has two full service carriers, which gives it a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline.”

To fund the acquisition, Korean Air plans to issue new shares in early 2021 to raise $2.25 billion. Korea Development Bank will inject $725 million, which it will transfer to Korean Air. The airline will invest $270 million of that to buy perpetual convertible bonds from Asiana and another $270 million as a down payment on a $1.3 billion contract to buy new Asiana shares, according to the statement.

Asiana and Korean Air’s stock both jumped after the news came out. They are already above where they were at the beginning of the pandemic earlier this year. Asiana especially is set to benefit for the acquisition as it would secure the funding needed for operations until the end of the year, as well as improve its financial position.

DDG
Based in NYC. Points/miles enthusiast for years and actively writing about it for the last two years at Danny the Deal Guru. I'm always looking out for deals. Making a few bucks is always nice, but the traveling is by far the best part of this business.

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