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On the 16th, the government will hold a meeting of ministers related to strengthening industrial competitiveness (mountain market meeting) to discuss specific methods and procedures for the merger of Korean Air and Asiana Airlines. At the meeting that day, the acquisition of Asiana Airlines by Korean Air was effectively formalized. The government sees it as a realistic alternative in the absence of suitable candidates for the acquisition. However, there is not much to overcome, such as opposition from employees who are concerned about workforce restructuring, monopoly issues, and opposition from the tripartite alliance (Former Korean Air Vice President Cho Hyun-ah, KCGI , Bando E&C) in dispute with Hanjin Group.
● “Practical alternative” … Korean Air-Asiana’s big business officially
At the mountain market meeting on the 16th, Korean Air’s acquisition of Asiana Airlines will be finalized and detailed financing plans will be discussed. The company plans to discuss obstacles to the merger, such as the possibility of legal disputes with HDC Hyundai Development, such as physical and human restructuring measures such as review of domestic and foreign business combination, route arrangement and maintenance business integration.
The government believes that there is no deserved candidate to buy Asiana Airlines after the failed acquisition of HDC prefecture, and there is no need to have two domestic airlines given the scale of the domestic aviation industry. Consequently, KDB Development Bank invests funds through a “ three-part allocation ” type of capital increase paid to Hanjin Kal, Korean Air’s holding company, and with the money Hanjin Kal buys a 30.77 stake % in Asiana Airlines owned by Kumho Industrial. It is being examined closely. A government official said, “The discussion about the work of each relevant department has already been completed to a certain extent,” and said, “It will lead to the direction determined by the mountain-gyeongjang meeting.”
This is the method implemented in the past when Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering merged. At the time of the merger of the two shipbuilders, a separate holding company was created and the shares of Daewoo Shipbuilding were handed over by KDB and the management rights of Daewoo Shipbuilding were handed over to Hyundai Heavy Industries through a method of compensation in the that KDB received shares from the holding company. A senior government official said: “The merger of the two airlines is the same as reorganizing the shipbuilding industry from Big 3 to Big 2.”
● There are many difficulties until the last sacrament.
However, there are many mountains that must be overcome until the final acquisition. For the merger of two companies with international routes, it is necessary to first pass the business combination exam not only by the Fair Trade Commission but also abroad. The participation of Korean Air and Asiana Airlines in domestic and international flights last year reached 72.0% and 66.4%, respectively. However, as the merger between the two companies is being led by the government, the possibility of the FTC reviewing the merger prevails. On the 13th, the Fair Trade Commission said about the merger of the two companies: “Market share and concentration alone cannot determine whether competition is restricted or not.” Combined overseas inspection also has no serious impact on airfare, so no problem. The government and creditors are most concerned about the opposition from the union of the two companies and HDC Hyundai Industrial Development. When the merger is complete, it is necessary to adjust routes, reduce equipment and reorganize the business, as both companies will inevitably reduce manpower in the process. The six unions at the two companies, including the Asiana Airlines Pilots Union, plan to hold an emergency response meeting for the takeover in the near future and are demanding participation in the acquisition process. HDC prefecture is also very likely to oppose the merger if it does not receive the 250 billion won in advance for Kumho Industrial. Currently, HDC Prefectural Corporation continues to occupy the preferred negotiator position because the reasons attributable to improper approval have not been determined.
Strong opposition from the tripartite alliance, a major Hanjin Kal shareholder, who owns about 46%, is also a problem. The trilateral coalition opposes the tripartite allocation of the capital increase paid to Hanjin Kal by the KDB. This is because if KDB becomes the main shareholder of Hanjin Kal, it is very likely that it will play a role as a friend of President Cho (about 41% stake) in the dispute over management rights. In response, the tripartite alliance issued a press release on the 15th and demanded: “Do not make a paid capital increase for the tripartite allocation that wastes the national blood tax, but allow the tripartite alliance to participate in the increase.
Reporter Byeon Byeon-guk [email protected] Go to reporter page>
Reporter Kim Hyung-min [email protected]
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