Thursday, August 22, 2019
Who Will Become Asiana Airlines' New Owner?
Several Groups Expected to Join Takeover Race
Who Will Become Asiana Airlines' New Owner?
  • By Jung Min-hee
  • April 15, 2019, 17:21
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Several Korean business groups, including SK, Hanhwa, Aekyung, Lotte and CJ, are expected to join the race to take over Asiana Airlines.

With Kumho Asiana Group's sale of Asiana Airlines confirmed, attention is focusing on who will be the new owner of the country's second-largest carrier.

The group announced on April 15 that it has decided to sell Asiana Airlines for the future of the company and its 10,000 executives and employees.

Kumho Asiana Group will proceed with the due process of selling Asiana Airlines, including the selection of a lead manager for the sale and the selection of a preferred bidder.

The sale price of Asiana Airlines is estimated at 1.6 trillion won, including the cost of acquiring new and old shares. The new owner will also have to invest a significant amount of additional funds to normalize its operations after the acquisition.

SK, Hanwha and Aekyung Group are cited as potential candidates for the takeover of Asiana Airlines. On top of that, Lotte, CJ, Shinsegae Group and Hotel Shilla are also expected to have interest in acquiring the airline as it can strengthen the competitiveness of their distribution and logistics businesses.

Rumors of SK Group's takeover of Asiana Airlines have been circulating since July last year. At that time, SK Telecom President Park Jung-ho officially proposed the acquisition of Asiana Airlines to the Supex Council, the group's top decision-making body, and reportedly discussed it officially at the strategic committee. Also behind the rumor was the fact that Choi Nam-kyu, former head of Jeju Air Co., was hired as vice president of the Supex Council's global business development division.

SK Group has announced that it is not considering acquiring the stake in Asiana Airlines at this time, but financial industry analysts believe that SK will enter the race to acquire Asiana Airlines in the future. The group has enough money and can generate significant profits by operating Asiana Airlines.

Hanwha Group is also a potential bidder. The group has Hanwha Air Space, the country's sole jet engine manufacturing company, as its affiliate, and had participated in Aero K, a low cost carrier (LCC) based in Cheongju, as a financial investor last year when it applied for a license for the air transport business.

Aekyung Group, which has South Korea's No. 1 LCC Jeju Air, is also a potential buyer as the acquisition of the nation's second-largest carrier will serve as an opportunity for the group to take another leap forward. Industry sources say Aekyung Group is likely to join the takeover race by forming a consortium with strategic or financial investors, as it does not have enough to finance the deal.

Shinsegae Group is also interested in making inroads into the aviation industry. When Kumho Engineering & Construction Co., the largest shareholder of Asiana Airlines, was put up for sale in 2015, it reportedly reviewed the acquisition. The group also negotiated with Yearimdang Publishing Co. in 2017 to acquire T’way Airlines, an LCC that has its base in Daegu. In addition, Shinsegae DF, which has a duty-free shop business, has made an equity investment in LCC Fly Gangwon as it believed it would be able to produce marketing effects in various areas such as attracting tourists and promoting duty-free shops.

CJ Group, a strong logistics industry player, is also firm in its commitment to the air transport business. Moreover, it is considered a strong candidate to take over Asiana Airlines because it has a lot of cash secured from the sale of CJ HelloVision. "CJ may be short on funds right now, but if it thinks it can acquire Asiana, it is highly likely that it will be able to secure enough funds through the sale of its real estate holdings," said an industry watcher.

Lotte Group is also likely to jump into the takeover race as it has recently launched integrated logistics company Lotte Global Logistics and declared that it will catch up with No. 1 CJ Korea Express. It is highly likely that Lotte and CJ compete for the acquisition of Asiana Airlines to become No. 1 in the domestic logistics industry. Since Lotte is engaged in distribution and duty-free businesses as well as logistics, the airline acquisition is expected to have a significant synergy effect.

Watchers say Hotel Shilla may also seek to acquire Asiana Airlines to generate synergy with its duty-free and hotel businesses.

"The outlook for the aviation industry is bright as demand for air travel is on the rise, and if Asiana Airlines, which has no problem other than its financial situation, is put up for sale, there is a possibility that companies other than SK, Hanwha, Aekyung, Lotte, Shinsegae, CJ and Hotel Shilla may be exploring the acquisition."