CJ Group stated they will acquire a 40% stake in Korea Express for KRW1.91 trillion (USD1.7 billion), marking a 3% discount to the initial takeover offer (Reuters, 18-Nov-2011). CJ Cheiljedang and CJ GLS unit stated they had also obtained the right to sell some of Korea Express' outstanding debt to major shareholders Daewoo Engineering & Construction and Asiana Airlines.
CJ Group to acquire 40% stake in Korea Express
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Korean Air's dangerously high debt requires it to shore up confidence. Delta investment would help
Korean Air's strategic positioning is precarious as its main Asia-North America segment faces competition from competitors on both sides of the Pacific. The situation is worsened by financials hammered by the bankruptcy of the Korean Air subsidiary Hanjin Shipping.
Yet even before, Korean Air's debt neared 1,000% and available cash covers only a month of revenues. The market does not have confidence in Korean Air's attempt to fix its liquidity position, and the Cho family that established, and still manages, Korean Air faces sticky scandals. As Korea is in political and business upheaval, chaebol conglomerates are no longer sacred.
Delta Air Lines to the rescue? With strategy and financials battered, Korean Air views Delta's long sought partnership more favourably than it did a few years ago when Korean Air was on a high and seemingly did not need its pushy SkyTeam cousin. Delta may be offering to inject equity into Korean Air, and perhaps will not partner without equity involved.
Korean LCCs: fleet surpasses 100 aircraft but market faces growth constraints; China the latest
Korea's LCC sector ended 2016 with 103 aircraft – the first time the collective fleet had crossed the 100 mark for what, until recently, was Northeast Asia's most dynamic market. Korea has six LCCs, with Jeju Air regaining a strong lead as the largest LCC. Half of Korea's LCC fleet has been added in the last three years. It is Northeast Asia's largest LCC market after China and, surprisingly, well ahead of Japan.
But overall Northeast Asia's LCC sector is pale in comparison to Southeast Asia, whose LCCs operate 74% more aircraft. Lion Air alone has more aircraft than all of Korea, while the AirAsia Group has more than all of China. Only three of East Asia's ten largest LCCs are in Northeast Asia.
And it is unclear how much further Korea's LCCs can grow in the short term. They have mostly flown domestically, and slots are now constrained. International opportunities are also challenging, and further complicated by the Jan-2017 decision of China to reject charter applications during the popular – and very profitable – Chinese New Year. Korea's LCCs needed liberalisation, not antagonism.