Asiana’s choice of HDC seen as a boon for Aekyung

Debt-ridden Asiana Airlines’ choice of a consortium led by Hyundai Development Company as its new owner -- one of the three bidders for a controlling 31 percent stake -- is a boon for Aekyung Group which lost out, according to analysts Wednesday.

The HDC consortium also includes Mirae Asset Daewoo, which will take 20 percent stake.

Soon after the announcement, Aekyung said in a statement that it will continue to advance its budget airline brand Jeju Air’s safety operation system and do its best for customer satisfaction. 

“We hope Asiana stabilizes its business operations and continues to contribute to the aviation industry’s growth,” Aekyung said in a statement.
Aekyung actively participated in the preliminary bid touting its experience in the aviation business and the resulting synergies. 

The group also stressed that due to the complexity of the aviation industry, the new owner should be chosen based on experience instead of the funding power. 

The HDC consortium reportedly offered around 2.5 trillion won ($2.1 billion) for the acquisition, about 1 trillion won higher than that suggested by Aekyung.

Regarding Aekyung’s failure to bag control of the country’s second-largest carrier, market analysts evaluated that its “negative factors have been removed.”

“The price suggested by Aekyung, to be honest, could have become a burden on its finances. (The group) has been cleared of negative factors that could have influenced its bottom line,” said SK Securities research Yoo Seung-woo in a report.

However, it is still possible that Aekyung could get a chance to acquire Asiana’s low-cost carriers Air Seoul and Air Busan, if HDC decides to hive off the subsidiaries. 

HDC Chairman Chung said in a press conference on Tuesday that a “decision (on what to do with Asiana’s LCCs) would require more strategic thinking.” Asiana holds a 45 percent stake in Air Busan.

Market watchers view that HDC can either decide to sell or retain it based on its business performance and potential.

Currently, the country’s fair trade law stipulates a holding firm to mandatorily hold 100 percent shares of its third-tier subsidiaries within two years of acquisition. Since HDC is a subsidiary of HDC Holdings, Asiana will become a second-tier subsidiary, making Air Busan a third-tier subsidiary. 

Meanwhile, other analysts also noted HDC’s risks of financing debt-ridden Asiana. 

“It remains unclear how much it will cost HDC at the final acquisition stage, and how the group will raise the capital,” said DB Financial Investment researcher Cho Yoon-ho.

In the first half of this year, Asiana’s total debt stood at 9.6 trillion won.
“It is still questionable how a construction firm can create synergies by acquiring an air carrier. From an investors’ point of view, it is uncertain whether it fits HDC’s business strategy to acquire Asiana’s LCCs,” Cho said in a report.

By Kim Da-sol (ddd@heraldcorp.com)