But takeover hinges on manufacturer absorbing former conglomerates' aero businesses

Korea Aerospace Industries (KAI) has resumed talks with Korean Air over how to absorb the latter's airliner component manufacturing business into the company.

High-level discussions overseen by commerce, industry and energy ministry director-general Hong Ki-doo took place in late June, say industry sources. But Korean Air says it will not complete a deal until KAI has finished integrating the former aerospace divisions of Daewoo, Hyundai and Samsung.

KAI was formed in 1999 from the three businesses as part of a politically driven move to consolidate South Korea's struggling industry into one financially viable entity.

The new conglomerate was supposed to have encompassed the entire Korean Air Aerospace manufacturing unit, but a deal has proved elusive.

Korean Air says: "We are in agreement with the principle of merging [the manufacturing business] with KAI, but KAI's operational status is not satisfactory for us to have talks. We need to wait until the financial and operational status of KAI is at a certain standard. Only after that can we talk."

KAI general manager and chief of strategic planning Ki Arm Park sees the recent meeting as a "starting point", saying more discussions are planned over coming months.

Korean Air Aerospace manufactures the Boeing 717 nose section, wing parts for Boeing's 737, 747 and 777, and fuselage parts for the Airbus A330/A340, as well various parts for US and Korean military aircraft.

The company exports about $100 million worth of parts annually and provides aircraft maintenance and modification services. The unit employs 3,500 maintenance technicians.

Source: Flight International