Busan lawmakers clash with Korea Development Bank over Air Busan merger

With Air Busan facing absorption into Jinair, Busan stands to lose its home carrier — and the resulting tension between the city's political circles and Korea Development Bank is emerging as a flashpoint for the September regular session of the National Assembly. Alongside allegations that Air Busan is being merged at a knockdown price, local lawmakers are increasingly vocal that Gadeok New Airport must not open without a dedicated home carrier.

Six People Power Party lawmakers representing Busan constituencies — Kim Mi-ae, Seo Ji-young, Park Sung-hoon, Kim Dae-sik, Jo Seung-hwan and Kwak Gyu-taek — held a press conference at the National Assembly's communication room on Tuesday, urging that the headquarters of the merged Jinair be relocated to Busan. "The regional home carrier that Busan has nurtured for 20 years is on the verge of disappearing into history," they said, demanding that the government and Korean Air fulfill their pledge to base the merged Jinair in Busan and make Gadeok New Airport a genuine second hub for South Korea.

Rep. Kim Dae-sik of Sasang-gu recalled that Korea Development Bank had publicly committed, when it announced the three-way merger of low-cost carriers Jinair, Air Busan and Air Seoul alongside the Korean Air–Asiana integration in 2020, to building a regional-airport-based second hub. "If that promise still holds, tell us where and how you plan to deliver it," he said. He also pressed Korean Air to present a concrete plan for establishing a genuine Busan home carrier, covering the relocation of the merged Jinair's headquarters to Busan, management and route planning, fleet deployment, flight and maintenance operations, and local employment.

Rep. Kwak Gyu-taek of Seo-gu and Dong-gu had been the first to dig into the merger terms before his Busan colleagues joined the fray. According to Kwak, the merger agreement signed Friday set the merger price at 5,156 won per Jinair share and 1,476 won per Air Busan share, with Air Busan shareholders receiving 0.2862684 Jinair shares for each Air Busan share they hold. He argued the deal fails to reflect Air Busan's true value and called for the merger ratio to be verified from scratch.

Speaking with a reporter, Kwak said the three companies' boards had approved the merger agreement but that shareholder votes in December and a regulatory approval process still lay ahead. "Air Busan's assets, earnings and hub value must be reassessed by an independent body free from company influence, in line with the intent of the revised Capital Markets Act," he said.

His plan calls for Busan city and local shareholders to lead the reassessment, with Busan lawmakers demanding disclosure of relevant documents and a recalculation of the merger ratio. "If the reassessment confirms the merger ratio is unreasonable, the agreement must be revised or withdrawn — and if it is not corrected, it should be voted down at the shareholder meeting," he said.

Kwak also drew a hard line on the risk of Busan losing its home carrier. "If the merged low-cost carrier's headquarters ends up in another city, or if Busan is treated as a nominal branch, we must consider either spinning Air Busan off and keeping it in Busan before the merger is completed, or selling it in a way that involves local companies and financial institutions," he said.

Should a spin-off prove impossible, he said the worst-case scenario — Gadeok New Airport opening without a home carrier — must be prevented through government incentives such as priority allocation of traffic rights and slots, support for new international routes, and reductions in airport facility fees to help cultivate a separate home carrier. He also held Korea Development Bank to account as "the architect of this big deal," saying it bears responsibility for managing and enforcing the promises made, and pressed Korean Air to spell out specific plans for aircraft based in Busan, flight and maintenance personnel, and expansion of routes departing from the city.

The ultimate variable is how Korea Development Bank responds. When it pushed the Korean Air–Asiana integration in November 2020, the bank touted the three-way low-cost carrier merger as a means of building a regional-airport second hub and revitalizing local economies. At the time, KDB injected 800 billion won ($578 million) in policy funds into Hanjin Kal and still holds a 10.58 percent stake in the holding company as a major shareholder. Yet on the question of where the merged low-cost carrier should be headquartered, the bank has consistently maintained that it is "a matter for the individual companies to decide."

Busan's political circles are preparing their next move. If Korea Development Bank does not give clear answers on its responsibilities as lead creditor bank, and if Korean Air fails to lay out a concrete operating plan for the merged low-cost carrier, lawmakers intend to summon KDB Chairman Park Sang-jin and Hanjin Group Chairman Cho Won-tae as witnesses at the upcoming national audit to hold them directly accountable. Lawmakers also plan to demand that the Ministry of Land, Infrastructure and Transport incorporate measures to strengthen regional hub status into its merger approval process. The national audit — set to take place before the three carriers' December shareholder meetings — is shaping up as the decisive battleground over both the Air Busan merger ratio and the question of where the merged carrier will be headquartered.