BAE Systems Case Offers Lessons for Hanwha-KAI Merger Debate – Seoul Economic Daily

BAE Systems Case Offers Lessons for Hanwha-KAI Merger Debate  Seoul Economic Daily

Debate over monopoly concerns in the defense industry has intensified over Hanwha Group's move to raise its stake in Korea Aerospace Industries (KAI). At a parliamentary audit of government agencies on the 20th, lawmakers raised concerns that a combination of the two companies could undermine competition in the domestic aerospace and defense industries. At the same time, expectations are high that merging aircraft engine and avionics capabilities with complete-aircraft development and production could strengthen global competitiveness. The Export-Import Bank of Korea currently says it has no plan to sell its KAI stake. But because this issue could shape the future of Korea's aerospace and defense industries, it needs to be approached dispassionately from a national strategic perspective.

First, KAI's revenue has grown slowly while Hanwha Aerospace, Hyundai Rotem and LIG D&A expanded through exports. Its revenue rose about 33% from 2.7869 trillion won in 2022 to 3.6964 trillion won last year. Critics also note that after failing to win four major domestic aerospace contracts last year, KAI withdrew in April this year from a U.S. Navy next-generation advanced trainer program it had been pursuing jointly with Lockheed Martin. The company urgently needs growth drivers that link the technological capabilities built through the successful KF-21 development to next-generation large-scale research and development programs and expanded exports. KAI has also seen repeated