The sale of a 41.75% stake in Korea Aerospace Industries (KAI) appears to have fallen through owing to a lack of bidders.
Korean Air said in a stock exchange statement that it has submitted a bid for South Korea's aircraft maker, but the law requires the submission of at least two bids for the sale to move forward.
A KAI spokesman confirmed news reports that the stake sale has fallen through owing to a lack of bidders.
Industry sources in Seoul said that Korean Air has long been interested in obtaining a controlling stake in KAI.
In addition to its airline operations, Korean Air's aerospace division produces components for a number of major commercial aircraft programmes and provides MRO services for both commercial and military aircraft.
Korean Air hopes to play an increasingly larger role in producing its own aircraft and has worked on several unmanned air vehicles.
The acquisition of KAI, which produces the T-50 advanced jet trainer, FA-50 light fighter, KT-1 basic trainer and subassemblies for a number of other aircraft types, would make Korean Air the dominant player in South Korea's aerospace sector.
KAI announced on 31 July that six of its shareholders are offering to sell a combined 41.75% stake in the company, 11.4% of which comes from state-owned Korea Finance Corporation.