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Business deals

Asiana Airlines shares jump as Seoul considers sale to Korean Air

State-run bank says salvage deal is one option to help two leading carriers

South Korea's two leading airlines were struggling even before the coronavirus pandemic devastated the industry.    © Reuters

SEOUL -- Shares of Asiana Airlines rose sharply on Friday on expectations that the South Korean government will sell the troubled full-service carrier to its larger rival in a deal that would inject taxpayer money into both airlines.

State-run lender Korea Development Bank said on Thursday evening that Asiana could be sold to Hanjin KAL, the holding company of Korean Air. Asiana's shares soared 25.6% to 5,000 won as the market opened on Friday, before falling back to close the day up by 7.8%.

News of the possible salvage deal comes a few months after a $2.2 billion acquisition deal between Kumho Industrial, Asiana's parent, and Hyundai Development Company collapsed. HDC, a mid-sized builder, gave up on buying Asiana in September as the coronavirus pandemic devastated the airline industry. Korea Development Bank, a main creditor of Kumho, has been looking for a Plan B since then.

"KDB is considering many options [for the sale of Asiana], but nothing has been decided yet," the bank said in a statement.

Local media reported that the bank's chairman, Lee Dong-gull, is in talks with Hanjin KAL executives to strike a deal. Under the plan, KDB would buy new shares of Hanjin KAL, which would in turn use the money to buy a 30.8% stake in Asiana from Kumho.

If the deal is completed, South Korea will have a mega airline with 15 trillion won ($13 billion) in revenue and a fleet of 259 aircraft. However, the deal will need the approval of antitrust authorities around the world, as their combined market share is over 50% for some routes.

KAL and Asiana were struggling to cope with poor earnings and heavy debt even before the pandemic. KAL posted a 619.5 billion won net loss in the first half this year, widening its loss from 482 billion won a year ago. Asiana's net loss was 633.3 billion won for the January-June period, up from 378 billion won of net loss year-on-year.

Asiana and KAL both declined to comment.

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