Korean Air to decide Asiana's cargo business sale to aid merger hopes

An Asiana Airlines cargo plane [ASIANA AIRLINES]

Korean Air Lines and Asiana Airlines are slated to decide on selling the latter carrier’s cargo business at a board meeting on Monday, which could directly influence the European antitrust regulators’ decision to permit a merger between the companies.

Korean Air plans to put together an agenda for selling Asiana's cargo business and detailed measures to maintain employment levels during a board meeting Monday morning, according to local media outlets.

Asiana Airlines is set to hold a meeting at 2 p.m. the same day to decide whether to agree with Korean Air's plan.

The sale of Asiana's cargo business is a major factor in the merger as the European Commission (EC) requested that Korean Air Lines submit formal remedies to address concerns that the merger could possibly dominate passenger and cargo flights connecting Korea to European cities.

Korean Air has until the end of October for the submission, which makes the board meeting the last chance to discuss the sale.

Asiana has 79 aircraft, with 11 of them for cargo operations which carry products to 25 cities in 12 countries across the globe.

In 2021, when Covid-19 hit the company, the cargo business saved the company with 3.15 trillion won ($2.3 billion) of sales, accounting for 77 percent of its total annual sales.

Its cargo sales stood at 3 trillion won in 2022, surpassing half of its total sales of 5.63 trillion won for the year. When combined with Korean Air's cargo business revenue of 7.72 trillion won from the previous year, the merger could result in an annual cargo revenue exceeding 10 trillion won.

The two carriers control 60 percent of the total cargo volume in Europe, according to data from the Korea Civil Aviation Association.

Korean Air awaits approval not only from the EC but also from the U.S. Department of Justice, and Japan. The merger would fall through if any of the three jurisdictions decided against approval.

At least four executives of six should agree with the sale at the Asiana's board meeting. It is reported that most of the directors agree with the sale, though some raised concerns that the sale will dramatically decrease the value of the Asiana Airlines.

Furthermore, Korean Air is reportedly considering the return of four out of its 14 European routes. These routes, connecting Incheon to Paris, Frankfurt, Rome, and Barcelona, are areas of concern due to both Korean Air and Asiana Airlines operating in them, raising monopoly-related issues.

BY SARAH CHEA [chea.sarah@joongang.co.kr]