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South Korea's Jeju Air warns it may scrap plan to take over budget carrier peer Eastar Jet

The logo of Jeju Air is seen at its office near Gimpo Airport in Seoul

SEOUL (Reuters) - South Korea's top budget carrier Jeju Air Co Ltd <089590.KS> said it may walk away from a deal agreed in principle to take over smaller Korean peer Eastar Jet, a Jeju Air official said on Thursday, as air travel slumps amid the coronavirus outbreak.

Jeju Air agreed in March to acquire 51% of Eastar Jet for 54.5 billion won ($45.40 million), a price lower than a preliminary deal to pay about 69.5 billion won that Jeju Air reported in a regulatory filing in December.

"We will consider abandoning the deal" within 10 business days, the Jeju Air official said, citing difficulties in ongoing talks over undisclosed preconditions.

Eastar Jet was not immediately available for comment.

Shares of Jeju Air closed up 6.9%, compared with a 1.4% rise in the wider KOSPI <.KS11>.

Analysts said it might be very difficult to save the deal from collapse as South Korean carriers, hit by low travel demand due to travel restrictions stemming from the coronavirus pandemic, as well as a diplomatic feud between South Korea and Japan last year.

"Jeju Air's management should conclude whether the takeover plan of Eastar Jet is still prudent to pursue given the crisis the aviation industry is facing," said Um Kyung-a, an analyst at Shinyoung Securities.

($1=1,200.4000 won)

(Reporting by Heekyong Yang; Editing by Kenneth Maxwell)