Jeju Air said Thursday it can now walk away from a controversial 54.5 billion won ($45 million) merger deal with Eastar Jet after the troubled low-cost carrier failed to meet the deadline to fulfill its prerequisites.

“Eastar Holdings has not fulfilled the prerequisites for its stock purchase agreement” by Wednesday midnight, Jeju Air said in a statement, adding that it is in a position to terminate the deal.

“We received an official document yesterday from Eastar Holdings concerning the contract fulfillment. There was effectively no progress in meeting the prerequisites for the deal,” Jeju Air said.

The company said it has yet to make a “final decision,” however, citing the government’s ongoing mediation efforts to save the deal.

In response, Eastar Jet refuted Jeju Air’s claim.

“Eastar Jet and Eastar Holdings have fulfilled the prerequisites for the stock purchase agreement as stated in the contract,” the airline said.

It also called for dialogue to “finalize the deal shortly,” saying it has done its best to address its debts worth 170 billion won at Jeju Air’s request, despite claiming it’s not obliged by contract to do so.

The announcements are the latest in a series of back-and-forth between the two airlines since a merger deal was announced earlier this year.

Earlier this month, the government offered Jeju Air over 170 billion won as the aviation industry continues to suffer from the novel coronavirus pandemic. According to the International Air Transport Association, the industry could lose up to $113 billion globally this year as a result of the pandemic.

The merger plan was seen as South Korea’s first and largest LCC’s aim to solidify its position as one of the three major airlines in the country following Korean Air and Asian Airlines, boasting the combined fleet size of 68 aircrafts.

But the high-profile deal soon plunged into controversy and months of finger-pointing over issues such as “corporate restructuring” and unpaid wages.

Jeju Air previously argued that it has “done its best” to close the acquisition deal since signing the contract and that Eastar Jet has “not been diligent” in executing prerequisites including clearing its debts.

The company also said the claim that it had ordered a restructuring of Eastar Jet’s workforce caused “deep worries whether stable business management is possible.”

Unpaid wages for Eastar Jet workers amount to 24 billion won, according to the air carrier.

On Tuesday, the pilot union of the airline offered to waive some of their unpaid wages and called for Jeju Air to come to the table.

Some 1,600 Eastar Jet staff are expected to lose their job if the company files for bankruptcy.

By Yim Hyun-su (hyunsu@heraldcorp.com)