Jeju Air's Eastar takeover on brink of collapse amid pandemic

Jeju Air's planned takeover of smaller budget carrier Eastar Jet appears to be on the brink of falling through as Jeju Air asked Eastar Jet to settle all of its debts by mid-July to proceed with the deal. In March, Jeju Air signed a deal to acquire a controlling 51.17% stake in Eastar Jet from Eastar Holdings for 54.5b won as part of its expansion strategy despite the new coronavirus' growing impact on the airline industry. In a letter sent to Eastar on Wednesday, Jeju Air called on Eastar to pay off all of its debts estimated at up to 100b won (US$83m), including unpaid wages to its employees, delayed payments to subcontractors and office operating expenses, by July 15, a tall order that cannot be met by cash-strapped Eastar Jet. "We sent a letter to Eastar yesterday to demand overall debt payments in the following 10 working days. Unless Eastar meets our requirements, we could notify them that the deal is no longer valid," a Jeju Air spokesman said. But the company did not clarify the value of the unpaid debts. In response, Eastar immediately sent a letter to Jeju Air on Thursday to explain its current financial status and seek understanding from the country's biggest budget carrier over the unpaid debts, Eastar Senior VP Kim You-sang said. If Jeju Air does not accept Eastar's explanation, the acquisition deal is widely expected to be scrapped.<br/>