Sale of Air Busan, Air Seoul inevitable

An Air Busan A321LR airliner / Courtesy of Air Busan

PEFs may acquire embattled Asiana from creditors next year

By Park Jae-hyuk

Creditors of Asiana Airlines are expected to push for the sale of Air Busan and Air Seoul, in a bid to normalize the nation's second-largest full-service carrier following the collapse of the HDC-Asiana acquisition deal, according to industry officials, Sunday.

There is also a growing expectation that the cash-strapped airline can be sold to private equity funds (PEFs), when it is put up for sale again sometime next year after the sale of the two budget carriers owned by Asiana.

After Kumho Industrial notified HDC Hyundai Development Company of the cancellation of the Asiana deal, Friday, the creditors led by Korea Development Bank (KDB) decided to provide immediate financial aid worth 2.4 trillion won ($2 billion) to Asiana. The aid will be delivered in a 40 trillion won relief fund ― which the government established to help pandemic-hit key industries.

The creditors are expected to convert their perpetual bonds in Asiana worth 800 billion won into shares to become the largest shareholder of the air carrier.

They will likely focus on improving its financial structure and normalizing its management for a while, before making another attempt to sell Asiana sometime next year when the COVID-19 pandemic is expected to subside.

The creditors will not be able to cut the workforce of Asiana in the short run, because the use of the relief fund for key industries requires a company to maintain more than 90 percent of its jobs for six months.

However, the creditors will need to sell the two Asiana-owned budget carriers and its IT service subsidiary, Asiana IDT, because the relief fund cannot be used to support a company's affiliates.

KDB Vice President Choi Dae-hyun hinted at the sales of Asiana subsidiaries during a press conference, Friday, saying the creditors will consider selling Air Seoul, Air Busan and any Asiana-owned golf courses and resorts if needed.

Industry officials said Air Busan could be sold to a Busan-based company in the near future, because Asiana holds a relatively smaller 44 percent stake in the low-cost carrier, unlike Air Seoul, a wholly owned subsidiary of Asiana.

If the creditors finish normalizing Asiana as planned, they may sell the airline to PEFs. The creditors have maintained the stance that they can sell Asiana to anyone who can manage the air carrier properly.

Stonebridge Capital and KCGI have been mentioned as possible contenders, because they took part in the preliminary bidding to take over Asiana last year. The acquisition of Asiana by PEFs has become more likely, since Eastar Jet began negotiations with several PEFs after the rupture of its merger with Jeju Air.

KDB, however, has remained cautious about its options to normalize Asiana, saying the specifics over its management control on the airline have yet to be finalized.

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