Kumho Asiana Group is set to sign a formal deal with a local consortium this week to sell its flagship airline unit, industry sources said Monday.
Kumho Industrial Co., the largest shareholder of Asiana, will sign the deal with a consortium comprised of HDC Hyundai Development Co. and brokerage house, Mirae Asset Daewoo Co., on Friday
Last month, the consortium submitted an overall acquisition price of 2.5 trillion won ($2.1 billion), and was picked as the preferred bidder for the country's No.-2 airline. It will acquire Kumho Industrial's 31-percent stake in Asiana, as well as new shares to be issued and the airline's six affiliates, which include low-cost carriers Air Busan and Air Seoul Inc.
The HDC-Mirae Asset Daewoo consortium plans to pay only about 320 billion won to Kumho Industrial to acquire its Asiana shares, and spend rest 2 trillion won to buy new shares, so that the airline can use that money to improve its financial status.
The consortium's move is expected to lower Asiana's debt ratio from 660 percent to 300 percent, according to industry observers.
Asiana Airlines owed financial institutions a total of 2.7 trillion won as of the end of June, with 500 billion won of loans due to mature by the end of December.
From January-September, Asiana posted a net loss of 524.14 billion won, swinging from a net profit of 6.33 billion won a year ago.
Analysts said HDC could take rigorous cost-cutting measures to make Asiana healthier.
As of Dec. 1, Asiana operated 86 planes covering 74 international and 11 domestic routes.
But its profitability has worsened due to a combination of lower travel to Japan amid a trade dispute and fierce competition with low-cost carriers on Southeast Asia routes.
To improve profitability, HDC will also try to boost the airline's cargo business by seeking support from the Hyundai family. HDC chief Chung Mong-gyu is a nephew of late Hyundai Group founder Chung Ju-yung whose scions now own conglomerates, like Hyundai Motor Group and Hyundai Heavy Industries Group.
Asiana insiders worry that the HDC takeover could lead to company restructuring that includes job cuts, although Chung denied possible workforce realignment in his press conference last month.
Asiana Airlines already announced that it has opened a voluntary retirement program to employees who have worked at least 15 years at the company.
Asiana's unionized workers last week vowed to ensure their job security and hinted industrial action if their demands aren't met.
The fate of Asiana's subsidiaries is also uncertain. Under local regulations, Asiana needs to acquire a 100-percent stake in its affiliates within two years after it becomes a part of HDC Group's holding company structure. Currently, Asiana only owns a roughly 45-percent stake in local LCC Air Busan Co. and a 76-percent stake in IT service firm Asiana IDT Inc. (Yonhap)