South Korea’s flag carrier, Korean Air announced that it will buy out its smaller rival, Asiana Airlines in a $1.6 billion USD deal as South Korea’s aviation industry looks to consolidate as the new reality of the global COVID-19 pandemic.
Worldwide travel restrictions that have been imposed to prevent the COVID-19 disease from spreading have wreaked havoc on the airline industry, hammering Asiana, which was already in trouble.
Korean Air said in a statement that, “The main reason behind Korean Air’s decision to acquire Asiana Airlines at this time is to stabilize the Korean aviation industry, which is suffering from the Covid-19 pandemic.”
Korean Air added in its statement that: “Once Korean Air completes its acquisition of Asiana Airlines, the airline is expected to be ranked as one of the top 10 airlines in the world.”
According to experts familiar with the Korean Air and Asiana deal, it also includes Asiana’s two low-cost carriers, Air Seoul and Air Busan.
“Considering that Korean Air’s financial status could also be endangered if the Covid-19 situation is prolonged, it is inevitable to restructure the domestic aviation market to enhance its competitiveness and minimize the injection of public funds,” the Korean Air statement stated.
Asiana has long been plagued by financial problems prompting parent company Kumho Industrial to put its 31% stake up for sale in 2018 as it came under pressure from its creditors. A previous deal for a South Korean builder, HDC Hyundai Developer, to acquire Asiana collapsed in September as the pandemic tore through the aviation industry.