In a significant development in the aviation industry, four South Korean airlines have placed non-binding bids for the cargo arm of Asiana Airlines (OZ, Seoul Incheon), as reported by Reuters. The sales process, overseen by UBS Bank on Asiana’s behalf, saw Jeju Air, Air Premia, Air Incheon, and Eastar Jet stepping forward with their proposals at the end of February. This move comes as part of the regulatory conditions set by the European Commission for the approval of Asiana Airlines’ merger with Korean Air (KE, Seoul Incheon).
The merger, which is set to reshape South Korea’s aviation landscape, involves Korean Air acquiring a 63.9% stake in Asiana Airlines for KRW1.8 trillion won (USD1.35 billion). A significant part of the merger agreement is the divestiture of Asiana’s cargo business, including its fleet of eleven freighters, airport slots, workforce, and existing contracts. The proceeds from the sale are earmarked for reducing Asiana’s outstanding debts.
To finalize the merger, Korean Air and Asiana must present the details of the prospective cargo business buyer to the European Commission for approval, aiming for a completion date by October 2024.
The contenders for Asiana’s cargo division are notable for their diverse backgrounds and strategic interests. Eastar Jet, Air Premia, and Jeju Air are primarily focused on low-cost passenger services, whereas Air Incheon specializes in freight operations. Each of these bidders is supported by significant private equity, including VIG Partners for Eastar Jet, JC Partners for Air Premia, Aekyung Group for Jeju Air, and Socius for Air Incheon.
Aero K (RF, Cheong Ju), another low-cost carrier, was also rumored to be interested in Asiana’s cargo operations. Despite not submitting a non-binding bid in the initial phase, Aero K’s absence at this stage does not preclude its participation in future rounds of bidding, with reports suggesting it plans to present a binding offer subsequently.
The acquisition of Asiana’s cargo arm is expected to exceed KRW1.5 trillion (USD1.1 billion), factoring in the assumption of Asiana’s liabilities. The cargo business, boasting the second-largest market share in South Korea, generated over KRW1.6 trillion (USD1.2 billion) in revenue in 2023, highlighting its substantial value and strategic importance in the competitive cargo sector.
This unfolding bidding war marks a pivotal moment for South Korea’s aviation industry, as it undergoes significant consolidation and strategic realignment. The successful acquisition of Asiana’s cargo operations will not only reshape the freight landscape but also bolster the competitive edge of the acquiring airline within the global cargo market.
