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Jeju Air's takeover of Eastar Jet on shaky ground
Updated: 2020-07-16 07:13:34 KST
It's either deal or no deal.
South Korea's largest low-cost carrier, Jeju Air's final call on its planned acquisition of cash-strapped Eastar Jet is drawing keen attention from industry officials, as Eastar Jet failed to meet the deadline suggested by Jeju Air.
Kim Hyo-sun reports.
The time has come for South Korea's biggest low-cost carrier, Jeju Air, to make a final decision on its planned takeover of its debt-ridden rival Eastar Jet.
Wednesday was the deadline suggested by the former to meet specific conditions, but the latter failed to meet them.
On July first, Jeju Air asked Eastar Jet to settle all its debts within the next ten working days in order to proceed.
This includes some 141 million U.S. dollars of unpaid wages as well as delayed payments for fuel and the use of airport facilities.
About 20 million dollars of the debt are unpaid wages, especially following the COVID-19 pandemic.
Jeju Air has, however, said that Eastar Jet's failure to meet the deadline does not mean the acquisition deal will be cancelled immediately, adding a final decision will be made following comprehensive consultations."
However, many see the conditions first suggested by Jeju Air as a tall order that cannot be met by the cash-strapped budget carrier.
"If the M&A is not finalized, it will result in a financial loss of 9.6 million U.S. dollars for Jeju Air, and leaves no solution for Eastar Jet. As a result, many are concerned about the outcome."
The decision is not an easy one for Jeju Air as it already reported an operating loss of 55 million dollars in the first half of this year due to the COVID-19 pandemic.
A decision to cancel the acquisition would result in Eastar Jet going bust, with 16-hundred employees losing their jobs.
Kim Hyo-sun, Arirang News.
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