Asiana fails to reach cargo unit sale decision leaving Korean Air merger in doubt

Industry

Published: 31 Oct. 2023, 10:43 Updated: 02 Nov. 2023, 09:43

Asiana fails to reach cargo unit sale decision leaving Korean Air merger in doubt

An aircraft from Asiana Airlines takes off from Incheon International Airport's runway on the day of the scheduled interim board meeting to determine the fate of the airline's cargo business on Monday. [YONHAP]

The board of Asiana Airlines, Korea's second-largest airline, failed to reach a conclusive decision on the sale of its cargo business on Monday night, clouding the prospects of the impending merger with Korean Air.

The airline is scheduling a new board meeting in early November to continue the deliberations.

Selling the lucrative cargo business was part of the remedial measures to address concerns raised by the European Commission (EC) regarding potential monopolistic effects arising from the merger. Following the inconclusive decision of its smaller rival, Korean Air, which was due to submit remedial measures to European regulators within this month, requested an extension of the submission deadline.

The board meeting of Asiana Airlines commenced at 2 p.m. Monday and lasted until 9:30 p.m., ultimately adjourning without a decision — whether for an approval or rejection.

"Monday's board meeting has been temporarily prorogued as it couldn't reach a decision due to disagreements among certain board members, notably concerning conflict of interest matters," Asiana explained Tuesday. "The board aims to reschedule and hold another meeting in early November to arrive at a conclusive resolution."

According to sources within the airline industry, the board directors of Asiana Airlines plan to gather Thursday morning at an undisclosed location in Seoul to continue discussions.

The sale of Asiana's cargo business has emerged as a pivotal point in the ongoing merger negotiations with Korean Air, as it hinges on securing approval from Asiana's board of directors, a decision that, as of now, remains unresolved.

During the extensive eight-hour discussion, focal points of contention reportedly included worries about the cargo business sale potentially constituting a breach of duty. There were also debates regarding the legitimacy of the shareholding exercise carried out by one of the five external directors, Yoon Chang-beon, a legal counsel from Kim & Chang — a law firm that has been providing advisory services to Korean Air regarding the merger.

Ahead of Asiana's Monday board meeting, one of the two internal directors unexpectedly resigned, citing "personal reasons" for his resignation — and it has come to light that he held a dissenting view on the sale of the cargo business.

Korean Air agreed on the remedial measure to be proposed to the European regulators at its board meeting Monday, which include the transfer of flight slots on four European routes — Frankfurt, Paris, Rome and Barcelona — along with selling Asiana's cargo business following the merger.

Korean Air officially disclosed these remedial measures through a regulatory filing on Tuesday, emphasizing their readiness to comply. However, they introduced a caveat, stating, "If the Asiana Airlines board does not grant approval [for the sale of the cargo business], the efficacy of our board's resolution will be nullified."

BY SEO JI-EUN [seo.jieun1@joongang.co.kr]