The Korea Fair Trade Commission, South Korea's regulatory authority for economic competition, approved on April 23 a deal by Jeju Air (7C, Jeju), the country's biggest low-cost carrier, to buy a controlling stake in its smaller rival Eastar Jet (ZE, Seoul Gimpo).

Jeju Air signed the deal to acquire the 51.17% stake, amounting to 4,971,000 common shares, in Eastar from Eastar Holdings for KRW54.5 billion won (USD44.2 million) in early March.

The antitrust regulator said in a statement that it had approved the deal by using an exceptional clause in the law, as it was clear Eastar Jet would not survive unless the deal went ahead. It was recognised as an “unrecoverable company” under the Fair Trade Act.

“The Fair Trade Commission conducted the review as promptly as possible, considering the circumstances in the airline industry as it faces the aftermath of the pandemic,” the watchdog said.

Last year, Eastar Jet posted an operating loss of KRW79.3 billion (USD64 million) as a boycott campaign over Japan’s export regulations and the global B737 MAX suspension hit earnings.

“Under these circumstances, it was considered difficult to repay outstanding debts amounting to KRW115.2 billion [USD93.4 million] at the end of March 2020, including aircraft leasing fees, airport fees, jet fuel purchase costs, and wages. Its tangible assets were just KRW45 billion [USD36.5 million] at the end of 2019,” the FTC said.

The carrier admitted in a letter to employees on April 23 that despite the deal it would not be able to pay wages for April due to worsening business conditions, News1 Korea reported.

“Unfortunately, it is difficult to pay the salary scheduled for April due to the continued deterioration of the company. We will do our best to successfully complete the acquisition process as soon as possible and pay unpaid wages through quick management normalisation,” the letter said.

Jeju Air operates forty-five B737-800s, forty-two of which are leased, while Eastar operates an entirely leased fleet of sixteen B737-800s, two B737-900(ER)s, and two inactive B737-8 MAX aircraft, according to the ch-aviation fleets module.

Jeju parent Aekyung Group, a Korean cosmetics-to-health care conglomerate, submitted a bid last year to acquire Asiana Airlines (OZ, Seoul Incheon) but lost out to eventual winner HDC Hyundai Development Company.