Jeju Air Acquires Eastar Jet for 54.5 Billion KRW (Update)

First Merger Among Competitors... "Will Achieve Economies of Scale"

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] After about three months of deliberation, Jeju Air has embraced Eastar Jet. On the 2nd, Jeju Air announced that it signed a Stock Purchase Agreement (SPA) to acquire 4,971,000 shares (51.17%) of Eastar Holdings and Eastar Jet for approximately 54.5 billion KRW.

Accordingly, Jeju Air plans to pay the remaining 43 billion KRW, excluding the 11.5 billion KRW deposit paid to Eastar Holdings as a performance guarantee upon signing the memorandum of understanding for management rights acquisition last year, in full by April 29.

This merger and acquisition (M&A) has attracted public attention as it is the first combination between competitors within the low-cost carrier (LCC) industry. Since the LCC model was introduced domestically in 2005, this is the first case of acquisition between competitors, namely Jeju Air and Eastar Jet.

Jeju Air aims to realize "economies of scale" through this acquisition. By achieving economies of scale, they plan to reduce costs, operate route networks flexibly, and secure price competitiveness.

Lee Seok-joo, CEO of Jeju Air, stated, "Considering the current aviation market situation due to issues such as the COVID-19 pandemic, Jeju Air and Eastar Jet have reached a price adjustment through mutual concessions to ultimately contribute to the development of the aviation industry. We are confident that by joining forces to overcome the crisis, normalization will be achieved soon, and we will do our best to stabilize Eastar Jet’s management and improve profitability through maximizing operational efficiency."