Cash-strapped Eastar Jet Co Ltd appears unlikely to meet a July 15 deadline set by potential buyer Jeju Air Co Ltd for their  acquisition terms to be resolved, making it almost certain that the deal between the budget carriers will collapse.

Jeju Air said in a press release on July 6 that it would pull out within 10 working days unless Eastar Jet addressed a number of issues, including the payment of outstanding wages. Industry watchers said it would be almost impossible for Eastar Jet to meet the conditions before the deadline.

Relations between the two parties have deteriorated since a share purchase agreement was signed in March, with Eastar Jet also battling a labor union strike over the unpaid wages and job security.

“If the deal falls through, Eastar Jet would have no other option but to file for bankruptcy protection,” an industry insider said. “Chances are very slim that Eastar Jet can find another buyer.”

Some analysts have cast doubt on whether Eastar Jet could recover financially even after it entered bankruptcy protection.  The airline has serious cash problems, meaning it would be unable to raise funds for working capital before entering bankruptcy protection, which would reduce its value even further.

If it does end up filing for bankruptcy protection, Eastar Jet could take out a so-called debt in possession (DIP) loan for short-term liquidity, but DIP lenders take a senior position on liens of company assets ahead of existing creditors. So even after creditors permit the DIP loan to avoid liquidation, it is unlikely they would be satisfied with the airline’s reorganization plan.

“Eastar Jet’s recovery is unlikely even after the airline enters bankruptcy protection because it has little cash on hand and no options to secure funds for working capital,” a source said. “[If the deal falls through], the airline’s only hope of survival is to find a new buyer, which seems quite unlikely at the moment.” (Reporting by Ik-hwan Choi)