KDB chief says integration of Korean Air, Asiana Airlines may generate W300b in profit

Korean Air Lines Co.’s planned acquisition of rival Asiana Airlines Inc. and subsequent restructuring will lead to an annual profit of 300 billion won ($269.6 million), the head of the main creditor of Asiana said Monday.

Lee Dong-gull, chairman of the state-run Korea Development Bank (KDB), offered the estimate in an interview with a local broadcaster, adding that the two carriers can brace for the post-pandemic era in two to three years if they push to restructure in a way that streamlines their routes and reduces maintenance costs.

Last week, the KDB signed an investment agreement with Korean Air’s parent Hanjin KAL Corp. to inject 800 billion won into Hanjin KAL through a rights offering and convertible bonds. Hanjin KAL will then participate in a 2.5 trillion-won stock sale by Korean Air that will be used to acquire Asiana.

Still, the homegrown equity fund Korea Corporate Governance Improvement (KCGI), representing an alliance that opposes the deal, has filed an injunction against the KDB’s plan to join Hanjin KAL’s rights issue on the grounds that the share sale to the designated third party will damage the Hanjin Group holding firm’s existing shareholders’ value.

If the court accepts the fund’s injunction request, the deal will fall apart and Asiana will be placed again under control of its creditors.

Lee said he hopes that a court will make a reasonable decision, noting there will be fallout if the deal falls apart.

The KDB will have a 10.66 percent stake in Hanjin KAL after investing the 800 billion won in the holding firm and is widely expected to help Chairman Cho and his related parties fend off offensives from an activist fund attempting to take control of Hanjin KAL.

Korean Air, currently the world’s 18th largest airline by fleet, will become Asiana’s biggest shareholder with a 63.9 percent stake if the acquisition is completed.

Hit hard by the pandemic, Korean Air and Asiana have suspended most of their flights on international routes since March, and travel demand has dried up. (Yonhap)