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| A Jeju Air jet is parked in front of an Eastar Jet plane at Incheon International Airport. / Yonhap |
By Jun Ji-hye
Eastar Jet and Jeju Air are preparing to file lawsuits against each other after the latter scrapped its plan to acquire the former amid the prolonged COVID-19 pandemic, industry officials said Monday.
In March, Jeju Air signed a deal with Eastar Holdings, the holding company of Eastar Jet, to acquire a controlling 51.17 percent stake in the low-cost carrier for 54.5 billion won ($47 million). But Jeju Air abandoned its acquisition of the cash-strapped carrier, July 23, due mainly to growing uncertainties in the aviation industry caused by the pandemic.
Eastar Jet is working to file a damage suit against Jeju Air, claiming its financial difficulties had worsened since March when Jeju Air "asked it to shut down all of its flights" as part of measures to proceed with the takeover deal.
Eastar Jet said this has led to unpaid wages for its employees that total tens of billions of won.
Eastar Jet's debts, estimated at about 170 billion won including the company's delayed payments for fuel and the use of airport facilities as well as the unpaid wages, are some of the thorny issues that hampered negotiations between Eastar Holdings and Jeju Air.
"Jeju Air's order to stop our flights was the direct cause of the unpaid wages for our employees," Eastar Jet CEO Choi Jong-gu said in a statement. "We might not have been driven into a corner if Jeju Air had not issued such an order."
Eastar Holdings has already filed a lawsuit against Jeju Air, demanding fulfillment of a stock purchase contract.
In response, Jeju Air claimed Eastar's words contradicted its actions.
"Eastar Jet is currently working to find a new owner, which means the company acknowledged the cancellation of the takeover contract," a Jeju Air official said. "Demanding fulfillment of a stock purchase contract at this stage is contradictory to this."
For its part, Jeju Air is considering filing a lawsuit against Eastar Holdings for a refund of the down payment it made.
Since Jeju Air put a stop to its planned acquisition, Eastar Jet has been struggling to draw up countermeasures to avoid bankruptcy and find a new investor. The measures included reducing its workforce by more than half, which has caused intensifying conflicts between the company and its workers' union.
The union has held several press conferences, calling on the company to withdraw its decision to lay off hundreds of employees.
The union also called on Rep. Lee Sang-jik of the ruling Democratic Party of Korea, the founder of Eastar Jet, to take responsibility for and resolve the matter.
Rep. Lee told reporters at the National Assembly last week, "There is nothing I can do now as the founding family members already contributed all their shares," fueling the union's anger.
Amid growing criticism against Rep. Lee, the ruling party's in-house ethics probe body is investigating various allegations raised against him and will decide on whether to take disciplinary action soon.
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