[Weekly Issue] Korean Air + Asiana Airlines, three side effects left behind

The Scoope Separate News
Are there any problems with the dinosaur airline birth process?
The low-income class sighs from Corona 19
Increase people who feel suicidal

Leave behind
Three sequelae

The government and Korea Development Bank are pursuing a plan for Korean Air to acquire Asiana Airlines. After the acquisition of HDC Hyundai Development Company went bankrupt, he came up with a plan to merge the two airlines. The problem is that even if a dinosaur airline is born with this decision, the side effects won’t be easy. It is also possible that a “preferential dispute” over the future method of merger and acquisition (M&A) arises.

First, the acquisition method is controversial. Sangeun provides 800 billion won to Hanjin Kal, the holding company of Korean Air, through a paid capital increase, and instead receives a stake in Hanjin Kal. It is not a loan, it is literally support. Hanjin Kal will use this money to buy a stake in Korean Air and then reapply a capital increase worth 2.5 trillion won. With this money, he will acquire a stake in Asiana Airlines worth 1.8 trillion won.

What is needed here is for Hanjin Kal to be “in a dispute over management rights”. According to the precedent of the Supreme Court, the capital increase is prohibited in this situation. If the capital increase is tolerated, the current management can strengthen its control. This is why private equity fund KCGI filed a request for a temporary injunction against the issuance of new shares by Hanjin Kal, saying, “Saneun’s financing is a privilege for President Won-tae Cho. If the court accepts the request for an interim injunction, the acquisition will fail, but even in the opposite situation, the “legal dispute” is likely to continue.

Another problem is that Saneun’s funding won’t end there. Currently, the aviation industry is having a hard time with Corona 19. If the demand for air travel does not increase, it is clear that the trade difficulties will continue. Also, as of the second quarter of this year, Korean Air and Asiana Airlines’ debt ratios reached 1099% and 2291% respectively. In the process of acquiring Asiana Airlines, Korean Air’s debt-to-GDP ratio will inevitably increase. To support dinosaurs born through government-led M&A, it is inevitable to invest additional funds from KDB.

After the birth of the dinosaur airline, it is questionable whether Saneun will be able to control President Cho under this plan. The Bank of Korea delivered the time bomb (Asiana Airlines) to Korean Air and said: “If management performance is not good, we will promote the sacking of President Cho.” However, as stated earlier, it is difficult to improve management performance in a short period of time. It’s like making excuses and holding back. However, it is not that Saneun has adequately kept the owners or major shareholders in check.

It is also a problem that they have made a “one-sided decision” without listening to the views of shareholders or ordinary workers. The union of the two companies has already broken free. An aviation industry official said: “If there is no such method, Asiana Airlines can be nationalized, but I don’t know why it will pay a higher price,” he said. “This decision between the government and Saneun will cause controversy forever.”

Kim Jeong-deok, reporter for The Scoop
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Low-income captured
Indifferent crown

The consequences of the prolonged crown 19 were particularly devastating for the low-income class. As a result of the third quarter household trends survey published by the National Statistics Institute, only households with the lowest income level (20% lower than income) experienced a deficit. This means that consumer spending was greater than disposable income. In fact, the average household consumption expenditure in the first quintile in the third quarter was 1.59 million won, but disposable income was only 1346,000 won. It saw a deficit of 244,000 won.

It should be noted that families in the top quintile ▲ entertainment and culture (-20.9% compared to the same period last year) ▲ transport (-17.1%) ▲ clothing and shoes (-16.8%) ▲ education (- 15.6%) Despite being tight, it was in red. A National Statistics Bureau official said: “It’s because, while households in the top quintile have a very low disposable income, they have to pay a certain level of spending.”

The income level of households in the top quintile also worsened compared to the same period last year. Labor income decreased by 10.7% and business income decreased by 8.1%. Although transfer income increased by 15.8%, it could not compensate for the decrease in income.

The problem is that household income in the top quintile is unlikely to recover once it declines. In the first quintile, the average age of the head of the household (61.8 years) is high and the number of family members (2.38) is small. It is said that the retirement age group is mainly distributed and that few families support it. Even so, the country’s finances are not enough to invest public funds every time.

Joon-Young Ko, reporter for The Scoop
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Stress was reduced
Increased suicidal thoughts

As education and non-face-to-face work increased due to Corona 19, it was found that the stress experienced by Koreans in school and in social life has decreased. However, the number of people who feel suicidal due to financial difficulties has increased.

According to the results of the “ 2020 Social Survey ” published by the National Institute of Statistics, the percentage of people aged 13 and over who are stressed in daily life was 50.5%, a decrease of 3 , 9 percentage points compared to two years ago (2018). 68.0% of respondents said they were stressed at work, but it decreased by 3.8% compared to two years ago. Respondents who said they were stressed by school life (35.2%) also fell by 14.4 percentage points over the same period. Stress in school is interpreted to be significantly lessened when students take classes online instead of attending school.

However, the percentage of people who feel suicidal has increased by 0.1 percentage points from two years ago (5.1%). “People who thought they wanted to commit suicide at least once in the last year” represented 5.2% of the total and women (6.0%) were taller than men (4.5%). The reasons for suicidal thoughts were economic difficulties (38.2%), illness and disability (19.0%), loneliness and loneliness (13.4%), and family discord (11.9%).

“New disease (32.8%)” was cited as the leading cause of anxiety in society. Compared to two years ago, this is an increase of 29.9 percentage points. Following this, many people cited economic risk (14.9%), crime (13.2%), and national security (11.3%) as factors of anxiety. It is proof that many people groan in fear of Corona 19 and financial hardship.

Journalist Lee Ji won The Scoop
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