Aju Business Daily

SEOUL -- HDC Hyundai Development, a comprehensive construction company, became the new owner of South Korea's second-largest flag carrier, Asiana Airlines, vowing to provide a new flight service that puts top priority on safety based on its healthy financial structure.

A formal contract was signed on Friday between a consortium led by HDC and Kumho Industrial, the holding company of the Kumho Asiana group. HDC has teamed up with Mirae Asset Daewoo, the brokerage subsidiary of Mirae Asset, a major financial and asset management group, to acquire a 30.77-percent stake in Asiana and its affiliates including two budget carriers, Air Seoul and Air Busan.

Kumho and HDC have held negotiations to resolve differences mainly over the value of old shares and contingent debts since the consortium was selected as the preferred bidder on November 12. The consortium agreed to invest some 2.5 trillion won ($2.15 billion), including 322.8 billion won for the acquisition of old shares and 2.17 trillion won for new common shares.

HDC Hyundai Development is the parent entity in HDC Group, which has 24 subsidiaries in construction, petrochemicals, retail, property and financial management, healthcare, leisure, sports and finance. "We will immediately begin the acquisition process to stabilize Asiana Airlines as soon as possible so that it will be reborn as an airline that puts top priority on safety," said HDC Chairman Chung Mong-gyu.

Through Asiana, Chung said HDC plans to create synergy in the distribution sector, including duty-free shops and hotel businesses. Among South Korean airlines, Korean Air controls 33.4 percent of international flights and Asiana 23 percent.

Kumho has offered to sell its airline business under an agreement with Korea Development Bank, a state policy bank. Due to currency-related losses and increased jet fuel costs, Asiana swung to a net loss of 10.4 billion won in 2018 from a net profit of 248 billion won a year ago. In the first half of this year, Asiana's net loss widened to 292 billion won from 43 billion won a year earlier.

However, Chung has been confident of changing Asiana into a sound company in its financial structure through the injection of new money that will significantly lower its debt ratio below 300 percent from 660 percent and raise capital from 1.4 trillion won to 3.5 trillion won.

The acquisition of Asiana underlines HDC's drive to diversify its business portfolio into mobility, a concept that the HDC chairman has perceived for a long time since he took his hands off Hyundai Motor and turned over its leadership to Chung Mong-koo, the great son of the late founder of the Hyundai empire.

Chung Mong-gyu has predicted synergies in HDC's duty-free business, citing Asiana's in-flight duty-free services. His group has partnered with Hotel Shilla to launch a duty-free joint venture called HDC Shilla Duty Free Shop. Hotel Shilla is a major operator of luxury hotels and duty-free shops.