Seoul headquartered Asiana Airlines now has a new majority shareholder after the South Korean giant Hyundai Development Company signed a $2.2 billion deal for a controlling interest. After having been long plagued by financial issues, South Korea’s second-largest airline may now be poised for a renaissance following the car maker’s successful bid.
Earlier this year Asiana Airlines’ biggest shareholder, engineering and construction company Kumho Industrial was forced to put its 31% stake in the troubled airline up for sale following pressure from creditors.
The new $2.2 billion deal also sees Hyundai take control of Asiana Airlines affiliate low-cost carriers Air Seoul and Air Busan.
Hyundai will fix Asiana Airlines financial woes
In a statement following the purchase of Kumho Industrials shares carried by The Asia Times, HDC Hyundai Development chairman Chung Mong-Gyu said:
“We will immediately get into the process of taking over Asiana Airlines to (financially) stabilize the company.”
Long inundated with financial problems, Kumho Industrial has been struggling financially. It also suffered further issues due to a trade dispute between South Korea and Japan. Not only did the trade issues create less demand for travel between the two countries, but it also weakened the South Korean won against the dollar.
Could Asiana Airline’s fortunes be about to turn for the better?
The airline established itself as South Korea’s number two airline despite its financial woes. Additionally, the country’s largest carrier, Korean Air is out of favor with the government following various scandals. Subsequently, Asiana is poised to see a huge cash injection.
For years, Asiana has been forced to operate an older fleet due to spiraling debt. This prevented it from participating in the growth we have seen from other Asian carriers.
With Hyundai as its primary owner, Asiana could very well eclipse Korean Air to become South Korea’s largest airline. For its part, Hyundai does not have any experience when it comes to running an airline. However, it does operate hotels and a duty-free business that it can draw upon.
The Korean heavyweight also has close to 120,000 employees who it can rely upon to support its new airline venture. Financial experts are predicting that Hyundai will not try to set the world on fire right away. Instead, it will look to sort out the airline’s financial woes first.
They then predict that it will take two years for Hyundai to fully immerse itself into the airline business. Thereafter, it would undertake a massive restructuring and expansion project. Also, South Korea’s next general election is not due until 2022. Therefore, Hyundai has plenty of time to garnish government approval for its plans.
Korean Air needs to listen to Delta Air Lines
Currently, Korean Air still tops Asiana Airlines in every way, but it would be wise to listen to its business partner Delta Air Lines and accelerate its modernization started under the son of the company’s late chairman.
For its part, Asiana, under Hyundai leadership could look to emulate All Nippon Airways and its rags to riches story after it emerged from the ashes to become Japan’s biggest airline.
While Asiana will finally have the financial clout to compete with Korean Air, I do not expect to see Hyundai diving in head first, but rather dipping their toe in the water to see how warm it is.
What do you think about Hyundai taking control of Asiana Airlines? Please let us know in the comments.