South Korea's two biggest airlines want to merge, with Korean Air acquiring Asiana Airlines for $2.8 billion or 1.8 trillion won. This followed an injection through its parent, Hanjin Kal.
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According to MSN's latest report, the goal of the acquisition is to maintain South Korea's aviation industry as the global COVID-19 pandemic is still ongoing.
The Hanjin Group, which operates logistics businesses and operates airlines through subsidiaries, explained that it wants to improve Korean Air Line's competitiveness.
"In general, countries with a population less than 100 million have a single full-service carrier," said Hanjin, as reported by The Strait Times.
"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," added the agency.
How the acquisition works
The Strait Times explained that Korean Air Lines, the merger, should lower the flights' costs and streamline route operations.
The parent company said that these should take place while the consolidation of slots at Seoul's Incheon International Airport may increase joint ventures with global airlines.
It can also demand transit flights. Both Asiana and Korean Air improved on the stock exchange on Monday, Nov. 16. Korean Air Lines increased by around 18%, while Asiana Airlines soared by 30% daily limit.
Korean Air Lines plans to raise $2.2 billion
Korean Air is planning to issue new shares to raise $2.2 billion or 2.5 trillion won by 2021. The Hanjin Group also wants to participate in the upcoming issue since it received $722 million or 800 billion won. The agency is expected to transfer the budget to Korean Air Lines.
The giant South Korean airline's initial investment will help Asiana Airlines to secure the funding needed for operations until the end of 2021 and to improve its financial position.
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Written by: Giuliano de Leon.
