Korean Air Seeks to Buy Asiana (Recent News Article)
Nov 16, 2020, 4:18 pm
#16
Join Date: Mar 2010
Location: PIT
Programs: OZ Diamond, UA Gold
Posts: 9,926
Generally true, but if I can make it to Europe next year, A3 often has some fascinating and sometimes cheap routings even flying between 2 Central European cities. Plus I believe re-qualification is very easy.
Nov 16, 2020, 4:20 pm
#17
Join Date: Mar 2015
Location: YVR
Posts: 1,085
I believe to re-qualify is 12k + 4 segments, or 24k in one year?
Still a bit less generous than OZ's requirements for 30k over 2 years, but it is what it is.
Nov 16, 2020, 6:36 pm
#18
Join Date: Nov 2013
Location: NYC
Programs: OZ Diamond *A Gold / Delta Gold
Posts: 775
This might not be over just yet...
Here's an original blog in Korean.
ITS Tours!: IT & Smart Tours : ??? ???
A guy from this Korean travel blog has summarized the key points regarding the acquisitions.
https://www.milemoa.com/bbs/board/64...omment_8078299
But basically...
1. KDB is injecting $720M to subsidize this acquisition. HDC could not receive that money.
KE has issued corporate bonds for $2.3B and Hanjin KAL will receive $660M of it. This means that Hanjin KAL cannot fund the acquisition with the money received from KDB alone. Hankin KAL debt ratio is 108%, while a move like that shows that the only objective is to acquire OZ. However, HDC never received such offer. How would HDC react if KDB offered to put $720M as equity investment? The offer to "discount" $640M was just to be some sort of investment partner in the acquisition of OZ, in order to sell the shares at a later stage.
2. KE will become a major shareholder of OZ at 63.9% after investing $1.45B after a 3:1 capital reduction. They wouldn't give anything to Park Sam Ku from Gumho. HDC + Mirae Assets offered a price of $290M to Gumho and added an additional investment of $2B to only get a lower portion (61.5%).
What would have happened if KDB offered to HDC a deal with a capital reduction of 3:1 and no obligation to offer anything to Gumho? Would HDC have refused? They could put $2.3B into the deal, and if they could use it in full for the acquisition, they could get a much higher ratio then before. Compared to the conditions for KE, they are paying almost $900M more for a lower participation. While paying Park Sam Gu $290M more. According to KDB, the portion under Gumho's ownership were collateralized by KDB and were to be sold on the market by KDB later. Did they propose the same deal to HDC? They would have been extremely disappointed to have to pay Park Sam Ku.
3. Hanjin KAL is in a management dispute right now. The size of the investment of KDB can destroy the 3 way party in one single shot.
According to that article, KDB will own 10% of Hanjin KAL by investing $720M. The 3 way party have 46%, and Cho Won Tae owns 41%, so if KDB supports Cho Won Tae, all the work the 3 way party did to "kick out" Cho Won Tae becomes useless. Does it make sense to ask a private investment fund firm to compete against the KDB? KDB says that "they will not favor any decision in favor of the current management", but how can you trust that? KCGI has even proposed to do the acquisition themselves, but the board (the 3 way party is not present at the board as of now) and KDB have agreed on terms without involving them. The government should not favor one side like that. They should have refused to use their voting rights on the vote regarding the executive director at least. If KDB is helping Cho Won Tae to get reelected, then it would mean that public money of $720M have been used by the government to help the Cho Family.
This is why the 3 way party is now actively meeting. Is it clear they will refuse the decision, and will probably get into a lawsuit.
Issuing corporate bonds for Hanjin KAL and use that money to participate into KE, and for KE to use that money to acquire OZ is not an issue (monopoly is another matter). But allocating the whole $720M to Hanjin KAL isn't fair. As mentioned by KCGI, the existing shareholders should participate into the acquisition first, and when there is a gap in the amounts, ask for KDB to supplement it, as that makes the most sense. At least the Cho family should have showed intend by investing into Hanjin KAL. But in this deal, Cho Won Tae is not investing more than 0.01% into KE.
If KDB has some intention to avoid the criticism of a preferential treatment, it's not a 3rd party acquisition, but one that leverages the existing shareholders and other civilian investment first, and supplement it with KDB money afterwards. Hence, either Cho Won Tae invests more into Hanjin KAL in order to participate into the acquisition of OZ, or say he doesn't have the funds and give up the management of the company to KCGI, but this way of allowing the Cho Family to get a monopoly on the Korean air market without investing a penny has to stop. Because everyone knows that despite the situation being difficult with covid, the industry will revive in 2 years pretty strongly. If the acquisition is done in the way it is currently describe, KE will get enormous benefits at that time, and it will be the same for the Cho family. I do not believe that public funds should be used that way.
Here's an original blog in Korean.
ITS Tours!: IT & Smart Tours : ??? ???
A guy from this Korean travel blog has summarized the key points regarding the acquisitions.
https://www.milemoa.com/bbs/board/64...omment_8078299
But basically...
1. KDB is injecting $720M to subsidize this acquisition. HDC could not receive that money.
KE has issued corporate bonds for $2.3B and Hanjin KAL will receive $660M of it. This means that Hanjin KAL cannot fund the acquisition with the money received from KDB alone. Hankin KAL debt ratio is 108%, while a move like that shows that the only objective is to acquire OZ. However, HDC never received such offer. How would HDC react if KDB offered to put $720M as equity investment? The offer to "discount" $640M was just to be some sort of investment partner in the acquisition of OZ, in order to sell the shares at a later stage.
2. KE will become a major shareholder of OZ at 63.9% after investing $1.45B after a 3:1 capital reduction. They wouldn't give anything to Park Sam Ku from Gumho. HDC + Mirae Assets offered a price of $290M to Gumho and added an additional investment of $2B to only get a lower portion (61.5%).
What would have happened if KDB offered to HDC a deal with a capital reduction of 3:1 and no obligation to offer anything to Gumho? Would HDC have refused? They could put $2.3B into the deal, and if they could use it in full for the acquisition, they could get a much higher ratio then before. Compared to the conditions for KE, they are paying almost $900M more for a lower participation. While paying Park Sam Gu $290M more. According to KDB, the portion under Gumho's ownership were collateralized by KDB and were to be sold on the market by KDB later. Did they propose the same deal to HDC? They would have been extremely disappointed to have to pay Park Sam Ku.
3. Hanjin KAL is in a management dispute right now. The size of the investment of KDB can destroy the 3 way party in one single shot.
According to that article, KDB will own 10% of Hanjin KAL by investing $720M. The 3 way party have 46%, and Cho Won Tae owns 41%, so if KDB supports Cho Won Tae, all the work the 3 way party did to "kick out" Cho Won Tae becomes useless. Does it make sense to ask a private investment fund firm to compete against the KDB? KDB says that "they will not favor any decision in favor of the current management", but how can you trust that? KCGI has even proposed to do the acquisition themselves, but the board (the 3 way party is not present at the board as of now) and KDB have agreed on terms without involving them. The government should not favor one side like that. They should have refused to use their voting rights on the vote regarding the executive director at least. If KDB is helping Cho Won Tae to get reelected, then it would mean that public money of $720M have been used by the government to help the Cho Family.
This is why the 3 way party is now actively meeting. Is it clear they will refuse the decision, and will probably get into a lawsuit.
Issuing corporate bonds for Hanjin KAL and use that money to participate into KE, and for KE to use that money to acquire OZ is not an issue (monopoly is another matter). But allocating the whole $720M to Hanjin KAL isn't fair. As mentioned by KCGI, the existing shareholders should participate into the acquisition first, and when there is a gap in the amounts, ask for KDB to supplement it, as that makes the most sense. At least the Cho family should have showed intend by investing into Hanjin KAL. But in this deal, Cho Won Tae is not investing more than 0.01% into KE.
If KDB has some intention to avoid the criticism of a preferential treatment, it's not a 3rd party acquisition, but one that leverages the existing shareholders and other civilian investment first, and supplement it with KDB money afterwards. Hence, either Cho Won Tae invests more into Hanjin KAL in order to participate into the acquisition of OZ, or say he doesn't have the funds and give up the management of the company to KCGI, but this way of allowing the Cho Family to get a monopoly on the Korean air market without investing a penny has to stop. Because everyone knows that despite the situation being difficult with covid, the industry will revive in 2 years pretty strongly. If the acquisition is done in the way it is currently describe, KE will get enormous benefits at that time, and it will be the same for the Cho family. I do not believe that public funds should be used that way.
Nov 16, 2020, 7:55 pm
#19
Join Date: Nov 2004
Location: Los Angeles, CA; Philadelphia, PA
Programs: OZ Diamond
Posts: 6,140
LAX
Nov 16, 2020, 9:18 pm
#21
Join Date: Jan 2014
Location: SFO
Programs: OZ Diamond/*G, IHG Diamond Amb, Hilton Gold
Posts: 2,240
This might not be over just yet...
Here's an original blog in Korean.
ITS Tours!: IT & Smart Tours : ??? ???
A guy from this Korean travel blog has summarized the key points regarding the acquisitions.
https://www.milemoa.com/bbs/board/64...omment_8078299
But basically...
1. KDB is injecting $720M to subsidize this acquisition. HDC could not receive that money.
KE has issued corporate bonds for $2.3B and Hanjin KAL will receive $660M of it. This means that Hanjin KAL cannot fund the acquisition with the money received from KDB alone. Hankin KAL debt ratio is 108%, while a move like that shows that the only objective is to acquire OZ. However, HDC never received such offer. How would HDC react if KDB offered to put $720M as equity investment? The offer to "discount" $640M was just to be some sort of investment partner in the acquisition of OZ, in order to sell the shares at a later stage.
2. KE will become a major shareholder of OZ at 63.9% after investing $1.45B after a 3:1 capital reduction. They wouldn't give anything to Park Sam Ku from Gumho. HDC + Mirae Assets offered a price of $290M to Gumho and added an additional investment of $2B to only get a lower portion (61.5%).
What would have happened if KDB offered to HDC a deal with a capital reduction of 3:1 and no obligation to offer anything to Gumho? Would HDC have refused? They could put $2.3B into the deal, and if they could use it in full for the acquisition, they could get a much higher ratio then before. Compared to the conditions for KE, they are paying almost $900M more for a lower participation. While paying Park Sam Gu $290M more. According to KDB, the portion under Gumho's ownership were collateralized by KDB and were to be sold on the market by KDB later. Did they propose the same deal to HDC? They would have been extremely disappointed to have to pay Park Sam Ku.
3. Hanjin KAL is in a management dispute right now. The size of the investment of KDB can destroy the 3 way party in one single shot.
According to that article, KDB will own 10% of Hanjin KAL by investing $720M. The 3 way party have 46%, and Cho Won Tae owns 41%, so if KDB supports Cho Won Tae, all the work the 3 way party did to "kick out" Cho Won Tae becomes useless. Does it make sense to ask a private investment fund firm to compete against the KDB? KDB says that "they will not favor any decision in favor of the current management", but how can you trust that? KCGI has even proposed to do the acquisition themselves, but the board (the 3 way party is not present at the board as of now) and KDB have agreed on terms without involving them. The government should not favor one side like that. They should have refused to use their voting rights on the vote regarding the executive director at least. If KDB is helping Cho Won Tae to get reelected, then it would mean that public money of $720M have been used by the government to help the Cho Family.
This is why the 3 way party is now actively meeting. Is it clear they will refuse the decision, and will probably get into a lawsuit.
Issuing corporate bonds for Hanjin KAL and use that money to participate into KE, and for KE to use that money to acquire OZ is not an issue (monopoly is another matter). But allocating the whole $720M to Hanjin KAL isn't fair. As mentioned by KCGI, the existing shareholders should participate into the acquisition first, and when there is a gap in the amounts, ask for KDB to supplement it, as that makes the most sense. At least the Cho family should have showed intend by investing into Hanjin KAL. But in this deal, Cho Won Tae is not investing more than 0.01% into KE.
If KDB has some intention to avoid the criticism of a preferential treatment, it's not a 3rd party acquisition, but one that leverages the existing shareholders and other civilian investment first, and supplement it with KDB money afterwards. Hence, either Cho Won Tae invests more into Hanjin KAL in order to participate into the acquisition of OZ, or say he doesn't have the funds and give up the management of the company to KCGI, but this way of allowing the Cho Family to get a monopoly on the Korean air market without investing a penny has to stop. Because everyone knows that despite the situation being difficult with covid, the industry will revive in 2 years pretty strongly. If the acquisition is done in the way it is currently describe, KE will get enormous benefits at that time, and it will be the same for the Cho family. I do not believe that public funds should be used that way.
Here's an original blog in Korean.
ITS Tours!: IT & Smart Tours : ??? ???
A guy from this Korean travel blog has summarized the key points regarding the acquisitions.
https://www.milemoa.com/bbs/board/64...omment_8078299
But basically...
1. KDB is injecting $720M to subsidize this acquisition. HDC could not receive that money.
KE has issued corporate bonds for $2.3B and Hanjin KAL will receive $660M of it. This means that Hanjin KAL cannot fund the acquisition with the money received from KDB alone. Hankin KAL debt ratio is 108%, while a move like that shows that the only objective is to acquire OZ. However, HDC never received such offer. How would HDC react if KDB offered to put $720M as equity investment? The offer to "discount" $640M was just to be some sort of investment partner in the acquisition of OZ, in order to sell the shares at a later stage.
2. KE will become a major shareholder of OZ at 63.9% after investing $1.45B after a 3:1 capital reduction. They wouldn't give anything to Park Sam Ku from Gumho. HDC + Mirae Assets offered a price of $290M to Gumho and added an additional investment of $2B to only get a lower portion (61.5%).
What would have happened if KDB offered to HDC a deal with a capital reduction of 3:1 and no obligation to offer anything to Gumho? Would HDC have refused? They could put $2.3B into the deal, and if they could use it in full for the acquisition, they could get a much higher ratio then before. Compared to the conditions for KE, they are paying almost $900M more for a lower participation. While paying Park Sam Gu $290M more. According to KDB, the portion under Gumho's ownership were collateralized by KDB and were to be sold on the market by KDB later. Did they propose the same deal to HDC? They would have been extremely disappointed to have to pay Park Sam Ku.
3. Hanjin KAL is in a management dispute right now. The size of the investment of KDB can destroy the 3 way party in one single shot.
According to that article, KDB will own 10% of Hanjin KAL by investing $720M. The 3 way party have 46%, and Cho Won Tae owns 41%, so if KDB supports Cho Won Tae, all the work the 3 way party did to "kick out" Cho Won Tae becomes useless. Does it make sense to ask a private investment fund firm to compete against the KDB? KDB says that "they will not favor any decision in favor of the current management", but how can you trust that? KCGI has even proposed to do the acquisition themselves, but the board (the 3 way party is not present at the board as of now) and KDB have agreed on terms without involving them. The government should not favor one side like that. They should have refused to use their voting rights on the vote regarding the executive director at least. If KDB is helping Cho Won Tae to get reelected, then it would mean that public money of $720M have been used by the government to help the Cho Family.
This is why the 3 way party is now actively meeting. Is it clear they will refuse the decision, and will probably get into a lawsuit.
Issuing corporate bonds for Hanjin KAL and use that money to participate into KE, and for KE to use that money to acquire OZ is not an issue (monopoly is another matter). But allocating the whole $720M to Hanjin KAL isn't fair. As mentioned by KCGI, the existing shareholders should participate into the acquisition first, and when there is a gap in the amounts, ask for KDB to supplement it, as that makes the most sense. At least the Cho family should have showed intend by investing into Hanjin KAL. But in this deal, Cho Won Tae is not investing more than 0.01% into KE.
If KDB has some intention to avoid the criticism of a preferential treatment, it's not a 3rd party acquisition, but one that leverages the existing shareholders and other civilian investment first, and supplement it with KDB money afterwards. Hence, either Cho Won Tae invests more into Hanjin KAL in order to participate into the acquisition of OZ, or say he doesn't have the funds and give up the management of the company to KCGI, but this way of allowing the Cho Family to get a monopoly on the Korean air market without investing a penny has to stop. Because everyone knows that despite the situation being difficult with covid, the industry will revive in 2 years pretty strongly. If the acquisition is done in the way it is currently describe, KE will get enormous benefits at that time, and it will be the same for the Cho family. I do not believe that public funds should be used that way.
They had a pretty reasonable path to profitability, if they could just separate themselves from the Kumho group that kept using Asiana's profits to help other parts of Kumho instead of buying new planes that they desperately needed, but clearly the Cho family has a lot of sway over the Korean government and this deal is very very good for them.
HDC might be one of the biggest losers from this deal, not just because they didn't get to buy Asiana, but because they will only have one choice for corporate travel. There's a lot of competition in the Korea international market and the 3rd country transit via Korea market, but this is gonna hurt Seoul-based companies needing an airline for business travel because if they want to have a managed corporate travel type program, KE will be the only choice, and it may be the only nonstop option on many routes (and let's face it, execs of big Korean companies aren't going to be flying LCCs), allowing them to charge quite a bit.....I have to wonder if another conglomerate without an airline might suddenly become interested in buying Asiana given the alternative is paying a lot more for corporate air travel for the forseeable future.
Nov 16, 2020, 9:33 pm
#22
Join Date: Nov 2013
Location: NYC
Programs: OZ Diamond *A Gold / Delta Gold
Posts: 775
Ahh...so basically one chaebol outsmarted another in using the government so no more Asiana...
They had a pretty reasonable path to profitability, if they could just separate themselves from the Kumho group that kept using Asiana's profits to help other parts of Kumho instead of buying new planes that they desperately needed, but clearly the Cho family has a lot of sway over the Korean government and this deal is very very good for them.
HDC might be one of the biggest losers from this deal, not just because they didn't get to buy Asiana, but because they will only have one choice for corporate travel. There's a lot of competition in the Korea international market and the 3rd country transit via Korea market, but this is gonna hurt Seoul-based companies needing an airline for business travel because if they want to have a managed corporate travel type program, KE will be the only choice, and it may be the only nonstop option on many routes (and let's face it, execs of big Korean companies aren't going to be flying LCCs), allowing them to charge quite a bit.....I have to wonder if another conglomerate without an airline might suddenly become interested in buying Asiana given the alternative is paying a lot more for corporate air travel for the forseeable future.
They had a pretty reasonable path to profitability, if they could just separate themselves from the Kumho group that kept using Asiana's profits to help other parts of Kumho instead of buying new planes that they desperately needed, but clearly the Cho family has a lot of sway over the Korean government and this deal is very very good for them.
HDC might be one of the biggest losers from this deal, not just because they didn't get to buy Asiana, but because they will only have one choice for corporate travel. There's a lot of competition in the Korea international market and the 3rd country transit via Korea market, but this is gonna hurt Seoul-based companies needing an airline for business travel because if they want to have a managed corporate travel type program, KE will be the only choice, and it may be the only nonstop option on many routes (and let's face it, execs of big Korean companies aren't going to be flying LCCs), allowing them to charge quite a bit.....I have to wonder if another conglomerate without an airline might suddenly become interested in buying Asiana given the alternative is paying a lot more for corporate air travel for the forseeable future.
Either way, I did find some R class fares with KE that I think are reasonably priced from my perspective (cheaper than OZ in a way) and if that's the case, I can fly KE instead of OZ.
Nov 17, 2020, 1:20 am
#23
Join Date: Mar 2015
Location: Las Vegas
Programs: United Platinum, IHG Spire Ambassador, Hilton Diamond
Posts: 284
I got the card in January and am 3/4 of the way there... there’s no way I’ll be able to keep my platinum on UA with all of the PQPs and other new ABCs that they introduced... so I switched crediting stuff to OZ. Now where to?
Nov 17, 2020, 5:28 am
#24
Join Date: Mar 2010
Location: PIT
Programs: OZ Diamond, UA Gold
Posts: 9,926
Exactly. TK or A3 seems to be the choice, depending on one’s ability to fly through ATH yearly.
Nov 17, 2020, 9:49 am
#25
Join Date: Jul 2016
Programs: Diamond Asiana Cub // FF Miles&More // Diamond HHonors
Posts: 17
This one really hurts :/ Flying LH like a cow on normal years (like every week but with each time cheap tickets to near by destinations) and once a year to Korea on LEI the only way to get this star gold was OZ even with 80 flights per year but nearly all milleage coming from the trips to Korea ...
Not really caring about other benefits than lounge and security... I guess one option could be to buy a lounge membership but I have to say the senator lounge were quite appropriate for few hours transit time each week.
Am also a big supporter of anything else than KE as already mentioned below I do not think this would help service levels if KE is the only alternative. (Especially knowing how reluctant many Koreans are to fly a plane that is neither OZ or KE, I would think pricing and service would be affected negatively)
feeling a bit trapped with that news :/ (and also not a huge fan of Sky team especially on short flights which I can comment as I did not use them for long haul for years )
Not really caring about other benefits than lounge and security... I guess one option could be to buy a lounge membership but I have to say the senator lounge were quite appropriate for few hours transit time each week.
Am also a big supporter of anything else than KE as already mentioned below I do not think this would help service levels if KE is the only alternative. (Especially knowing how reluctant many Koreans are to fly a plane that is neither OZ or KE, I would think pricing and service would be affected negatively)
feeling a bit trapped with that news :/ (and also not a huge fan of Sky team especially on short flights which I can comment as I did not use them for long haul for years )
Nov 17, 2020, 12:11 pm
#26
FlyerTalk Evangelist
Join Date: Dec 2004
Location: East Coast
Programs: AA CONCIERGE KEY & 1MM, HILTON DIAMOND
Posts: 11,970
Am also a big supporter of anything else than KE as already mentioned below I do not think this would help service levels if KE is the only alternative. (Especially knowing how reluctant many Koreans are to fly a plane that is neither OZ or KE, I would think pricing and service would be affected negatively)
Nov 17, 2020, 4:13 pm
#27
Moderator: Asiana & Qantas Frequent Flyer
Join Date: Dec 2006
Location: STR/SYD/SMF
Programs: QF Lifetime SG, LH HON, OZ Lifetime Diamond +, HH Diamond, Marriott Lifetime Platinum
Posts: 14,375
[mod hat] Please keep the thread on topic which is KE to potentially buy a large stake in OZ. Speculating about the future of Asiana Club is on topic, however discussions about alternative *A loyalty programs should get their separate thread in the *A forum. [/mod hat]
Nov 17, 2020, 6:01 pm
#28
FlyerTalk Evangelist
Join Date: Mar 2002
Location: Saipan, MP 96950 USA (Commonwealth of the Northern Mariana Islands = the CNMI)
Programs: UA Silver, Hilton Silver. Life: UA .57 MM, United & Admirals Clubs (spousal), Marriott Platinum
Posts: 15,060
Nov 17, 2020, 6:15 pm
#29
Join Date: Jun 2011
Posts: 10
I am also concerned about management issues. Correct me, if I am wrong, but to me the problem seems to me that Asiana, a perfectly fine airline, drained by the conglomerate and its chaebol family is bought by another conglomerate run by a chaebol family that is not really well known for great management skills (to put it mildly). Also, as we know there is a huge fight within the family owning Hanjin/Korean Air. Effectively KDB is siding with one of the factions using public funds. New Korean Air will be publicly funded through KDB but without the control of a state-owned company through the parliament. To me this seems to be the worst of all worlds!
I think the best way would be to use this merger and KDB leverage to finally squeeze out the chaebol families. In the first stage this probably means the need to create a state-owned flag carrier airline. After COVID is defeated a privatization or another form of disinvestment by the state can be discussed. Hell, if frequent flyer programs are now more worth than the airlines itself (see Delta) how about WE take over with our Asiana Club miles :-) ! Given the competence and dedication I witnessed in this forum, can we do worse than the chaebol families?
I think the best way would be to use this merger and KDB leverage to finally squeeze out the chaebol families. In the first stage this probably means the need to create a state-owned flag carrier airline. After COVID is defeated a privatization or another form of disinvestment by the state can be discussed. Hell, if frequent flyer programs are now more worth than the airlines itself (see Delta) how about WE take over with our Asiana Club miles :-) ! Given the competence and dedication I witnessed in this forum, can we do worse than the chaebol families?
Nov 17, 2020, 8:48 pm
#30
Join Date: Aug 2008
Programs: HHonors Gold, Marriott Lifetime Gold, IHG Gold, OZ*G, AA Gold, AS MVP
Posts: 1,874
In any case, I'm nowhere near 500k so if KE closes the merger and thus closes the door on lifetime *G, I'll have to decide if I want to go shopping for another program or stick with KE.