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Korean Air boss has “no plans to restructure” Asiana Airlines after buyout completed
November 20th 2020
Korean Air (KAL) chairman, Walter Cho, told reporters this week the proposed acquisition of local rival, Asiana Airlines, could be completed without job losses or other restructuring. Read More »
This week KAL's parent company, Hanjin KAL, announced it would acquire Asiana Airlines in a 1.8 trillion won (US$1.6 billion) transaction.
KAL said the main reason for the decision to take over Asiana was to "stabilize the Korean aviation industry" battered by COVID-19. It plans to raise 2.5 trillion won in fresh capital, through the issuing of new shares, early in 2021, to fund the acquisition.
The deal also involved the Korea Development Bank (KDB), which would invest 800 billion won in Hanjin KAL with the purchase of 500 billion won in new shares and 300 billion won in exchange bonds.
Cho said there were "no plans to restructure" the workforce after the merger.
“We will create an opportunity to embrace all employees and welcome them as a family,” Cho told reporters on the sidelines of a Korea-U.S. business meeting at the Federation of Korean Industries in Seoul, local media reported.
“I will do my best to ensure no one is left behind," he said. Cho also tried to reassure the public the merger would not lead to higher fares.
Figures from local media reports showed KAL and Asiana had 18,000 and 9,000 employees, respectively. KDB vice president, Choi Dae-hyun, said this week there would be 800 to 1,000 "overlapping employees" following the merger. The South Korean government has backed the deal.
“Given the continuing slump in the aviation industry, the merger of these two large airlines is unavoidable if we are to forestall challenges across the entire aviation sector," said South Korea deputy minister for civil aviation, Kim Sang-do, Korean media reported this week.
Unions representing KAL workers said they supported the deal. Asiana workers opposed the merger.
Persistent Korean airline critic, private equity fund, Korea Corporate Governance Improvement (KCGI), said it would pursue legal action to block the tie-up, arguing it would damage shareholder value.
KCGI is a shareholder in Hanjin KAL and has agitated for change at the company in partnership with Walter Cho's elder sister, Cho Hyun-ah, and Bando Engineering and Construction Co. The alliance failed to oust Walter Cho as chairman at this year's annual general meeting.
The proposed deal, which the parties hoped to close by June 2021, will be reviewed by South Korea's antitrust regulator.
In September, Asiana's future was thrown into doubt when a proposed takeover of the airline by a consortium, led by Hyundai Development Company (HDC) and Mirae Asset Daewoo, was abandoned.
This week the airline reported a net profit of 2.3 billion won for the three months to September 30, 2020, compared with a net loss of 175 billion won a year ago. Revenue fell 53.2%, to 731 billion won, from 1.56 trillion won previously, Asiana said in a statement.
The positive result was due to the performance of its cargo business, particularly on U.S. and Southeast Asian routes, Asiana said. Its international passenger business had declined 83% from a year earlier due to the pandemic.
