Jeju-Istar Truth Battle... Could a 'No Deal' Lead to Legal Disputes?

Dispute Over Responsibility Amid Shutdown and Restructuring Issues
Jeju Air Expected to Release Official Statement Possibly Today

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] The muddy takeover and merger (M&A) battle between Jeju Air and Eastar Jet is showing signs of escalating into a legal dispute. As the truth battle between the two sides intensifies over who is responsible for Eastar Jet's shutdown and restructuring, and with the possibility of a 'No deal' in this transaction growing, both parties have begun to consider legal countermeasures.

According to the aviation industry on the 9th, the two sides have shown conflicting positions regarding the 'party responsible' for the sudden decision in March to suspend all flight routes and the decision on voluntary retirement.

Eastar Jet claims that Jeju Air was the party behind these decisions. According to a 6-minute and 30-second call recording released the previous day by the Eastar Jet Pilots Union, former Jeju Air CEO Lee Seok-joo told Eastar Jet CEO Choi Jong-gu, who was concerned about the shutdown, that "shutting down is the right thing to do even if it later goes to the authorities." Additionally, minutes from a March 9-10 meeting between executives of both companies, also released the same day, included mentions of Jeju Air discussing voluntary retirement and compensation amounts due to fleet reduction.

Jeju Air, which had previously claimed it did not intervene in Eastar Jet's major management decisions, responded by releasing rebuttal materials. The materials Jeju Air disclosed include a screenshot of a Microsoft (MS) Excel file related to voluntary retirement, which Eastar Jet provided on March 9. The file's creation date is February 21, implying that Eastar Jet had been preparing for restructuring due to fleet reduction even before the stock purchase agreement (SPA) on March 2.

Jeju Air plans to issue an official statement regarding the management intervention allegations after review by law firms as early as this afternoon. A representative from the Eastar Jet Pilots Union criticized this as a "somewhat weak excuse."

As the disagreement over the acquisition between the two companies unfolds into a truth battle, some predict that if the sale falls through, it could escalate into a legal dispute. Professor Hwang Yong-sik of Sejong University's Department of Business Administration said, "Even if Jeju Air conveyed opinions verbally, since the shutdown plan was actually realized, it will be difficult to avoid moral responsibility if the deal ends with no deal. If documented records remain, there is also a possibility of legal battles."

In fact, Eastar Jet is reportedly preparing a statement regarding the materials released by the union. Furthermore, some believe that if the acquisition ends with no deal, legal disputes will be inevitable, and preparations are underway accordingly.

However, there remains room for reconciliation as the possibility of a dramatic resolution cannot be completely ruled out. If the acquisition ends with no deal, Jeju Air could face moral responsibility, and Eastar Jet would inevitably face the worst-case scenario. The government is also actively involved. On the 3rd, Kim Hyun-mi, Minister of Land, Infrastructure and Transport, who oversees the aviation sector, met with Chae Hyung-seok, Vice Chairman of the Aekyung Group, and Lee Sang-jik, a member of the Democratic Party, urging the successful completion of the M&A.

Meanwhile, as the final deadline (10 business days) for Jeju Air's ultimatum to Eastar Jet approaches, tensions between the two sides are rising. On this day, the Eastar Jet Pilots Union held a press conference and meeting at the National Assembly with the Justice Party and others, and on the 8th, they plan to hold a rally in front of the Aekyung Group headquarters in Mapo-gu, Seoul, to urge a swift acquisition with a full-scale resolution rally.