Will Asiana Airlines become next Eastar Jet?

Asiana Airlines' B747 plane / Courtesy of Asiana Airline

By Jun Ji-hye

Hyundai Development Company's (HDC) planned takeover of Asiana Airlines appears to be on the brink of collapse, following the former's official request for another round of due diligence on the cash-squeezed air carrier, aviation industry officials and analysts said Monday.

HDC is putting the blame for the delay in negotiations on Kumho Industrial, which had decided to sell its airline unit, claiming that the latter has failed to send formal data related to the carrier's financial status, despite repeated requests since early April.

This was seen by some industry officials as HDC making excuses in preparation for abandoning its planned acquisition of the indebted carrier, while others speculated that HDC may be moving to reduce the price.

HDC signed an agreement to purchase a controlling stake in the nation's second-largest air carrier, held by Kumho Industrial, Dec. 27, but the negotiations between the two sides have made slow progress due mainly to the COVID-19 pandemic. The aviation industry is one of many that have been hit hard by the coronavirus outbreak.

Concerns have been raised over the possible collapse of the deal, especially after Jeju Air decided last week to abandon its acquisition of cash-strapped Eastar Jet because of growing uncertainties in the aviation industry caused by the prolonged pandemic.

HDC said Sunday that it sent a letter to Kumho Industrial demanding the additional due diligence, saying the conditions to proceed with the acquisition have yet to be met.

“We proposed the additional due diligence on Asiana Airlines and its affiliates for 12 weeks from mid-August to review changes in Asiana's financial status,” an HDC official said, noting that the company wants to look into the latest developments in the carrier's finances, including additional debt.

“We will be able to confirm whether conditions for proceeding with the acqusition are met, only after reviewing these,” the HDC official said.

The builder added it had sent 15 letters to Kumho Industrial and Asiana Airlines between April 9 and July 24, asking them to submit data related to the latter's financial status, but had received no reply.

Regarding the issue, an Asiana Airlines official said, “We have made every effort to close the deal and will continue to work hard to fulfil terms and conditions.”

Amid the negative outlook on the deal, Lee Dong-gull, chairman of the state-run Korea Development Bank, the main creditor of Asiana Airlines, called an emergency meeting to discuss countermeasures in case the deal collapses, according to industry sources.

Korea Investment & Securities analyst Choi Go-woon said, “HDC has nothing to lose as it could decide either to renegotiate the acquisition price or abandon the deal, after another round of due diligence. It will not be easy for Kumho Industrial to accept HDC's request as it could lead to a price reduction.”