Jeju Air, the country’s largest low-cost carrier by sales, said Wednesday that it had signed a deal to acquire 51 percent stakes in Eastar Holdings, the largest shareholder of a budget carrier Eastar Jet, in an apparent move to broaden its market share by absorbing an ailing air carrier.
Earlier this year, cosmetics-to-airline conglomerate Aekyung Group, which owns a 56.9 percent stake in Jeju Air, failed to takeover debt-ridden Asiana Airlines after the HDC Hyundai Development-Mirae Asset Daewoo consortium won the acquisition at 2.4 trillion won ($2 billion).
Jeju Air said in a statement that it had clinched a memorandum of understanding with Eastar Holdings on Wednesday to proceed with a stock purchase agreement on Dec. 31 and finalize the purchase and sale of the 51.17 percent or 4,971,000 shares in Eastar Jet at 69.5 billion won.
It plans to conduct due diligence from Dec. 26 to Jan. 9 to complete the acquisition process.
Jeju Air said it approached Easter Jet, which agreed to the sale for the “growth of the aviation sector.”
Eastar Jet’s financial condition has deteriorated in the past few years due to a surge in international oil prices as well as falling passenger numbers following the nationwide boycott of trips to Japan. The air carrier activated an emergency management system in September.
As of end of last year, Eastar Jet’s capital totaled 25.2 billion won, about one-fifteenth the size of Jeju Air’s.
“Through the acquisition of Eastar Jet, Jeju Air aims to expand economic scale by combining the two carriers and increase market share to control the market dominance. This will allow us to take a leading role to reorganize the current aviation market and enhance competitiveness in the global aviation industry” Jeju Air said in a statement.
Jeju Air CEO Lee Seok-joo said that the acquisition would shape effective operation of LCC business model and broaden Jeju Air’s passenger occupancy rate.
“Not only that, we will do our best to establish safe flight operation system and improve customer satisfaction through the acquisition,” said Lee.
By Kim Da-sol (firstname.lastname@example.org)