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(LEAD) S. Korea approves merger between budget carriers

All News 10:38 April 23, 2020

(ATTN: ADDS details in last 5 paras)

SEJONG/SEOUL, April 23 (Yonhap) -- South Korea's antitrust regulator said Thursday it approved a deal by Jeju Air Co., the nation's largest budget carrier, to buy smaller rival Eastar Jet Co., as the airline industry scrambles to survive over plunging demand caused by the coronavirus pandemic.

Jeju Air signed the deal to buy a 51.17 percent stake in Eastar Jet from Eastar Holdings for 54.5 billion won (US$45 million) in March as part of its expansion strategy.

In a statement, the Fair Trade Commission said it approved the deal by applying an exceptional clause of the antitrust law because Eastar Jet will not survive unless it is acquired by Jeju Air.

This photo taken on Dec. 19, 2019, shows planes operated by Jeju Air and Eastar Jet at Gimpo International Airport in western Seoul. (Yonhap)

Eastar Jet, which reported an operating loss of 79.3 billion won last year, has been suffering capital erosion since 2013.

Jeju Air has said the acquisition will help it gain a bigger market share and strengthen the company's competitiveness in global markets.

South Korea has two full-service carriers -- Korean Air and Asiana Airlines Inc. -- and seven low-cost carriers (LCCs) -- Jeju Air, Jin Air Co., Air Busan Co., Air Seoul Inc., Eastar Jet, T'way and Fly Gangwon.

Two more LCCs -- Air Premia Co. and Aero K Airlines Co. -- are expected to join the market next year, bringing the country's total number of LCCs to nine.

In February, the government announced it would inject 300 billion won to help LCCs stay afloat.

AK Holdings Inc., the holding firm of South Korean retail conglomerate Aekyung Group, holds a 59.93 percent stake in Jeju Air.

Hit by the new coronavirus, the local airline sector has been reeling from a sharp decline in sales amid lower demand.

As for full-service carriers, the Korea Development Bank (KDB) and the Export-Import Bank of Korea (Exim Bank) said Tuesday that they will inject 1.7 trillion won into Asiana Airlines.

The government is expected to release its financial support programs for Korean Air on Friday.
(END)

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