Embattled Eastar Jet Co. said Monday it will reduce its workforce by more than half as part of efforts to find a new investor after Jeju Air Co. scrapped its plan to acquire the smaller budget carrier amid the coronavirus pandemic.

Eastar plans to lay off 640 workers, or 53 percent, of its 1,216 employees on Oct. 14 before it begins the process of finding a new investor, Eastar Senior Vice President Kim You-sang said over the phone.

"Our lead managers and two private equity funds (that have an interest in investing in Eastar) want the company to reduce our fleet and workforce, among other things," he said.

The company plans to maintain 576 employees, including cabin crew members basically required to fly six planes, the executive said.  

Eastar currently has 18 planes, including two 737 MAX aircraft, and plans to reduce the fleet to five to seven planes.

Last month, Eastar selected Deloitte Anjin LLC, Yulchon LLC and Heungkuk Securities Co. as lead managers to resume a bid to sell a controlling stake of 51.17 percent.

The company is looking for a strategic investor, or a company, that has an interest in the majority stake in Eastar, the executive said.

"Ten companies, including PEFs, have expressed their intention to acquire Eastar. We are targeting to select a preferred negotiating partner by the end of this month," he said.

Eastar, which has suspended all flights since March, faces bankruptcy after Jeju Air scrapped the deal in late July due to the COVID-19 pandemic's growing impact on the airline industry.

In March, Jeju Air signed a deal to acquire the controlling stake in Eastar Jet from Eastar Holdings for 54.5 billion won ($45.53 million) as part of its expansion strategy despite the pandemic.

On July 1, Jeju Air sent an ultimatum demanding Eastar Jet pay off all of its debts, estimated at up to 170 billion won, including unpaid wages to its employees, delayed payments to subcontractors and office operating expenses, by July 15.

But Eastar failed to meet the demands. The company said the debt payment was not part of the deal and that it was not Eastar's duty to do so but Jeju Air's.

On July 23, the state-run Korea Development Bank (KDB) and the Export-Import Bank of Korea said they will withdraw their plan to extend loans worth 170 billion won to Jeju Air following the deal's collapse. (Yonhap)