S.Korea's Jeju Air to buy 51% stake in Eastar Jet for $59 mln (updated)

AK Holdings

18/12/2019 04:49

(Adds background on Jeju, Eastar, S.Korea budget carrier
market)
    SEOUL, Dec 18 (Reuters) - South Korean budget airline Jeju
Air Co Ltd  089590.KS  signed a preliminary deal to buy a 51%
stake in unlisted low-cost carrier Eastar Jet Co for about 69.5
billion won ($58.93 million), Jeju Air and its parent AK
Holdings  006840.KS  said on Wednesday. 
    The deal shows consolidation is underway in South Korea's
crowded budget carrier space as travel demand is falling to the
key Japan market due to a diplomatic row between the two
neighboring countries, hitting profitability of airlines. 
    The news of a majority stake sale in Eastar Jet came after
Eastar asked cabin crew members earlier this year to take unpaid
leaves as part of emergency cost-cutting plans to help it keep
flying. The carrier's losses had risen as demand for travel to
Japan fell and as its two Boeing 737 MAX jets were grounded.
 urn:newsml:reuters.com:*:nL3N2690RE 
    S.Korea currently has six budget carriers operating, with
three more expected to launch next year.
    Jeju Air, the country's largest budget carrier, said in a
statement it expected to sign a final deal by the end of this
year. Jeju Air's shares rose as much as 13% on Wednesday.
    Eastar Jet currently operates 34 routes with 23 aircraft, 
including the two grounded Boeing 737 MAX 8.
($1 = 1,179.3300 won)   

 (Reporting by Joyce Lee and Heekyong Yang; Editing by
Muralikumar Anantharaman)
 ((jungyoon.lee@tr.com; +82 2 6936 1467;))