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Following the news that a consortium formed between South Korea-based construction company Hyundai Development Co (HDC) and Mirae Asset Daewoo has agreed to acquire controlling stake in loss-making carrier Asiana Airlines Inc. for KRW2.5 trillion (US$2.2bn);

Aurojyoti Bose, Lead Analyst at GlobalData, a leading data and analytics company, offers his view:

“The acquisition, which also includes Asiana’s subsidiaries and low-cost carriers Air Busan and Air Seoul, will be a breather for the company. Asiana Airlines is currently under deep pressure as it owes a total debt of more than KRW6 trillion as on 30 September 2019. The airline’s troubles worsened in 2019 due to a combination of factors such as lower demand for travel to Japan and a weak won against the dollar.

“The loss making airlines has been in midst of financial problems in recent years due to trade war between South Korea and Japan resulting in decline in demand for trips between both the countries. As a result, for the first nine months of this year, the company posted a net loss of over KRW500bn.

“On the other hand, the deal is part of HDC Hyundai Development Co’s plan to diversify its business portfolio. The deal will help Hyundai benefit from the synergies as it has been expanding into hotel business and news is also doing the rounds of its likelihood of foraying into inflight duty free sales. At the same time, HDC intends to help lower Asiana’s debt-to-equity ratio, improve profitability by streamlining routes and enhancing cost effectiveness.”