South Korea’s Jeju Air could scrap plans to acquire a majority stake in compatriot low-cost carrier Eastar Jet.

Citing difficulties in ongoing discussions, a Jeju official was quoted as saying the carrier will consider abandoning the deal within 10 business days, Reuters reported on 2 July.

On 29 June, Eastar founder Lee Sang-jik announced he will give up the shares his family holds in the LCC, in hopes that Jeju will go ahead with the acquisition, local publication Korea JoongAng Daily reported on the same day.

Eastar estimates those shares are worth around W41 billion ($34 million), but did not detail the impact of this move on its finances.

Eastar’s chief executive Choi Jong-Gu says the airline has not been able to request government support as it was in the process of being acquired by Jeju. Eastar has suspended all flights from March and estimates that unpaid wages amount to W25 billion.

Lee is a ruling-party lawmaker in South Korea. His daughter and son own, respectively, 33.3% and 66.7% of Eastar Holdings. The entity is the holding company of Eastar. Its financial reports are not publicly available but local media reports indicate it owns just under 40% of the LCC.

Jeju Air announced in December 2019 that it would acquire 51% of Eastar for W69.5 billion. In March, both parties agreed on a lower, W54.5 billion cash consideration. The deal was set to close on 26 June.

Jeju planned to fund the acquisition by issuing a W10 billion convertible bond that offer nearly 1.5% of its own share capital at maturity, with a five-year tenor and bearing 1% coupon. It also guarantees the performance of the memorandum of understanding both carriers signed, for W11.5 billion, a sum that would be included in the sale price upon conclusion of the agreement.

In February, Jeju told Cirium there were no issues with the deal and it was held up by the due diligence process which needed more time. Since then, the issue of the W10 billion convertible bond has been delayed at least twice.

Cirium has contacted Jeju Air for comment.