South Korea’s antitrust watchdog has approved low-cost airline Jeju Air’s takeover of the management of struggling Eastar Jet, officials said Thursday.

Early last month, Jeju Air signed a deal with Eastar Holdings, the largest shareholder of Eastar Jet, to acquire the airline for 54.5 billion won ($45 million). The firm acquired 4,971,000 common shares for a 51.17 percent stake.

“The Fair Trade Commission conducted the review as promptly as possible, considering the circumstances of the airline industry suffering from the aftermath of the pandemic,” the FTC said.

As a result of the review, Eastar Jet was recognized as an “unrecoverable company” under the Fair Trade Act and was granted an exception to the restriction on competition.

From a competitive perspective, it was considered to be better to approve the tie-up to continue to use Easter Jet’s assets than to remove the airline, which is not possible to revive, the authorities said.

Looking at the financial situation of Eastar Jet, the total capital has been impaired every year since 2013 totaling 63.2 billion won at the end of 2019. Last year, the company posted an operating loss of 79.3 billion won due to the effects of a boycott campaign caused by Japan’s export regulations and the suspension of operations due to a Boeing 737-Max defect.

“Under these circumstances, it was considered to be difficult to repay outstanding debts amounting to 115.2 billion won at the end of March 2020, including aircraft lease fees, airport fees, air oil purchase costs and wages. Its tangible assets were only 45 billion won at the end of 2019,” the FTC said.

Also, with no prospective buyer other than Jeju Air, it was judged that it was difficult to utilize Eastar Jet’s assets in the market, the FTC said. 

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