Jeju Air scraps Eastar acquisition deal: source

SEOUL, July 22 (Yonhap) -- Jeju Air Co., South Korea's biggest low-cost carrier, has decided to drop its plan to acquire Eastar Jet Co. amid the industry's growing losses from the new coronavirus pandemic, an industry source said Wednesday.

Jeju Air notified Eastar of the decision that day and will make an announcement on Thursday at the earliest, the source said.

Jeju Air chief Kim E-bae already briefed the transport ministry on its decision on Tuesday, the source added.

The Jeju Air-Eastar deal drew market attention as the first M&A deal between two South Korean airline companies.

The deal had been on the verge of breaking down, however, largely due to Eastar's massive debt that worsened amid the losses incurred by the COVID-19 pandemic.

Last week, Jeju Air demanded Eastar Jet pay off all of its debts, estimated at up to 100 billion won (US$83 million), by July 15. The debt included unpaid wages to its employees, delayed payments to subcontractors and office operating expenses.

But the cash-strapped Eastar said Jeju Air was making an impossible request, as it has suspended all of its flights since March amid the new coronavirus outbreak.

jwc@yna.co.kr
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