South Korea's biggest low-cost carrier Jeju Air has scrapped its plan to acquire Eastar Jet.
Jeju Air officially made the announcement on Thursday and explained that COVID-19 pandemic-related uncertainties remain high.
The company is known to have notified Eastar on Wednesday.
Their M&A deal drew a lot of attention as it was supposed to be the first M&A between two South Korean airlines.
But the deal broke down as Eastar failed to meet Jeju Air's request to pay off all of its debts, citing losses caused by the COVID-19 pandemic.
Jeju Air signed a deal to acquire a 51-percent stake in Eastar Jet back in March.
It was to complete the deal by June 29th and issue eight.three million U.S. dollars worth of bonds on June 30th, which could later be turned into equities.
But the bond issuance was delayed as Jeju Air demanded Eastar get rid of its debts of nearly 83-million U.S. dollars by July 15th.
The debts include unpaid wages to employees, delayed payments to subcontractors and office operating expenses.
Eastar responded that it can't because it has suspended flights since March and the debt payment was not part of the share purchase agreement in the first place.
South Korea's transport ministry tried to mediate, offering to provide financial assistance if the two sides sealed the deal.
But Jeju Air was cautious throughout, as acquiring Eastar may cause bigger financial problems.
As the deal is scrapped, it's forecast that cash-strapped Eastar will file for bankruptcy.
The airline industry expects it's more probable that Eastar will be liquidated rather than rehabilitated.
Oh Jung-hee, Arirang News.