Big Deal Accelerates... Hanjin to Discuss Capital Increase as Early as Next Week

Will Structural Reorganization Be Triggered in LCCs as Well?

On the 27th, shareholders and executives moved inside the building at the 'Hanjin KAL 7th Regular General Meeting of Shareholders' held at the Hanjin Building Main Office in Jung-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Yoo Je-hoon] Hanjin Group is reportedly set to hold a board meeting as early as next week to discuss a capital increase for the acquisition of Asiana Airlines. This acquisition, considered the largest 'big deal' in the history of domestic private airlines, appears to be gaining momentum.

According to the business community on the 13th, Hanjin Group plans to hold a Hanjin KAL board meeting in line with the schedule of the government's Ministerial Meeting on Industrial Competitiveness Enhancement (Sangyeongjang) as early as next week to discuss the capital increase. The likely structure involves KDB Industrial Bank injecting funds into Hanjin KAL through a third-party allotment paid-in capital increase, and Hanjin KAL using this to acquire Asiana Airlines shares (30.77%) held by Kumho Industrial. ▶Related article on page 3

Since last year, financial authorities including KDB have been pushing for the sale of Asiana Airlines with HDC Hyundai Development Company, but after the M&A attempt failed, from September they have been closely discussing the acquisition between relevant ministries and Hanjin Group. The merger of the two companies has often been mentioned as a structural reform whenever Asiana Airlines faced a crisis, but the unexpected situation of the COVID-19 pandemic accelerated the discussions rapidly.

If Hanjin Group's acquisition of Asiana Airlines is confirmed, structural reform of the entire domestic aviation industry is expected to accelerate. Currently, besides the two major airlines, seven low-cost carriers (LCCs) are competing fiercely, and two new airlines are preparing to launch services.

Professor Heo Hee-young of Korea Aerospace University said, "If the major airlines merge, LCCs will naturally have to reconsider their survival strategies," adding, "If the major airlines consolidate into one and the low-cost carriers into two or three, the aviation market will enter a mature phase."