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Jeju Air Co. has threatened to walk away from its planned takeover of Eastar Jet Co. unless the latter settles its entire debt by July 15, issuing a final ultimatum to the cash-strapped budget carrier.

Jeju Air on Wednesday sent a notice to Eastar Jet to clear all of its debt obligations estimated at 80 billion won to 100 billion won ($66.6 million-$83.3 million) within the next 10 working days to continue with the deal, according to industry sources.

This is said to include the 25 billion won in overdue wages as well as delayed payments, office operating expenses and insurance fees.

Eastar Jet on Thursday sent an immediate response to Jeju Air, asking for understanding regarding its financial status, according to sources.

Upset by the latest development, Jeju Air shares closed Friday 1.77 percent lower at 16,650 won. Eastar Jet is not listed.

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Jeju Air agreed to buy a controlling 51.17 percent stake in Eastar Jet for 54.5 billion won last December, with plans to close the deal by June 29. Korea’s largest low-cost carrier, however, started to waver after prospects for the air travel industry turned sharply bleak due to the COVID-19 pandemic.

To speed up the process, Eastar Jet’s founding family members earlier this week offered to give up their entire 38.6 percent stake in the budget carrier in a show of commitment to salvaging the budget airline.

Eastar Jet is facing the biggest crisis in its 13-year history. It sorely lacks the financial means to settle all its debt within the given timeframe. If the deal falls through, it would even have to consider filing for bankruptcy, according to market observers.

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