KAI Privatization Rumors Grow Amid Governance Review

Korea Aerospace Industries (KAI), the sole complete aircraft manufacturer in the country, is facing growing rumors of privatization amid a governance review. The Export-Import Bank of Korea (Eximbank), the largest shareholder at 26.41%, commissioned a consulting service led by AT Kearney to bolster the aerospace industry's competitiveness.

This service, costing 1.8 billion won ($1.36 million), was allocated in August and includes an evaluation of major domestic aerospace companies and plans for fostering global anchor companies. Eximbank denied any intention to sell KAI but left open the possibility of privatization in the future. Hanwha Group, which held a 5.09% stake in KAI in May, rapidly increased its share to 15.89% in August, becoming the second-largest shareholder after Eximbank.

The relatively slow growth of KAI in comparison to major defense companies, with a sales growth rate of 30.8% from 2020 to 2025 compared to the industry average of 200.9%, has fueled speculation about a potential governance restructuring. The KAI labor union has expressed concern that Eximbank might transfer its KAI stake to Hanwha in the future.

Additionally, KAI's financial burdens have worsened, with total borrowings rising from 608.2 billion won in 2023 to 2.9801 trillion won by June, and the debt ratio increasing from 340.7% to 484.2%. While supporters argue that a Hanwha takeover could create an integrated defense system and boost next-generation weapon systems, concerns remain about compromising public interest and creating a monopoly in the defense industry.