South Korea’s low-cost airline Jeju Air is set to take over the management of struggling Eastar Jet, according to the firm’s regulatory filings Monday.

Jeju Air said it signed an acquisition deal with Eastar Holdings, the largest shareholder of Eastar Jet, for 54.5 billion won ($45 million). The firm acquired 4,971,000 common shares for a 51.17 percent stake.

The purchase price was lowered from 69.5 billion won, the initial price estimated at the time of signing the memorandum of understanding in December, allegedly due to the airline industry’s further setback from the new coronavirus outbreak.

Jeju Air had paid 11.5 billion won in December as a guarantee for the implementation of the MOU. It will pay the remaining 43 billion won on April 29.

The two companies shared the view on the recent crisis in the aviation market and they agreed the successful merger of the two sides was the right direction to overcome the crisis in the aviation industry, according to Jeju Air.

Through the acquisition, Jeju Air plans to maximize its operational efficiency by cutting costs using economies of scale, securing flexibility in utilizing routes and securing price competitiveness.

On Dec. 18, Jeju Air had signed a memorandum of understanding with Eastar Holdings, to start the acquisition process.

The potential sale of Eastar Jet, established in 2007, had been floated in the merger and acquisition market since its capital was impaired in recent years. In 2015, the company attempted to resolve its financial difficulties through an initial public offering but failed due to low market expectations. 

Last month, the firm paid its employees only 40 percent of their due pay, explaining that as the low-cost carrier industry was hit hard by the fast spread of COVID-19 infection and that it would pay the remainder later. 

By Shin Ji-hye (shinjh@heraldcorp.com)