Asiana Airlines Delays Decision on Cargo Sale Amidst Korean Air Merger Bid

After two days of intense board meetings, Asiana Airlines (OZ) directors have yet to reach a decision on the sale of the carrier’s cargo arm. The board plans to reconvene on November 2, 2023, to continue deliberations on the matter, which has significant implications for the ongoing takeover/merger bid by Korean Air (KE).

Korean Air, seeking approval from European Commission authorities for the merger, has urged Asiana to divest its cargo business. Earlier this month, Korean Air proposed an immediate payment of KRW150 billion (USD111 million) to the Asiana board if they agreed to sell the cargo business. Recent reports indicate that Korean Air has sweetened the deal with an additional KRW500 billion (USD370 million) in long-term loans, contingent on the cargo arm’s sale.

Originally planning to submit a corrective action plan to the European Commission by the end of October, Korean Air will now refer the matter back to its board following Asiana’s indecision. Reports suggest that Asiana’s board meetings were intense, with concerns raised about the potential breach of trust and the long-term costs associated with cargo divestment. The board was reduced to five members after an executive director resigned in protest before the initial meeting on October 30. Asiana’s union and former CEOs have also voiced opposition to the proposed divestment.

In the event of approval, three local low-cost carriers—Air Premia, Eastar Jet, and cargo operator Air Incheon—have expressed formal interest in acquiring Asiana’s cargo business. Notably, t’way Air, initially expressing interest, was reportedly excluded from the shortlist. However, as a consolation, t’way Air is set to acquire five passenger-configured A330-200s from Korean Air and commence passenger flights to select European Union airports.

Sources indicate that key concessions, including the sale of Asiana’s cargo arm and facilitating t’way Air’s entry into the European market, are contingent on European Commission approval. Any such transactions will only proceed post-approval, as Korean Air makes a last-ditch appeal to secure the regulatory green light for the merger. Stay tuned for further developments as the fate of Asiana’s cargo business and the overall merger bid unfolds.