4 low-cost carriers file to bid for Asiana's cargo business

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4 low-cost carriers file to bid for Asiana's cargo business

Published: 28 Feb. 2024, 18:21 Updated: 28 Feb. 2024, 18:52

SEO JI-EUN
seo.jieun1@joongang.co.kr

An Asiana Airlines' freighter [ASIANA AIRLINES]

Jeju Air and Air Premia were among the four Korean budget carriers that submitted bids to take over Asiana Airlines' cargo business, according to an aviation industry official.

Eastar Jet and Air Incheon joined the other two in submitting letters of intent expressing interest in acquiring the division in the preliminary bidding that concluded Wednesday afternoon, while foreign firms were excluded from participation due to criteria requiring operations at Incheon International Airport and the possession of an Air Operator's Certificate (AOC).

The auction follows Korean Air's remedial measures to successfully acquire its smaller rival, Asiana Airlines.

Last November, the flag carrier submitted a set of remedy measures to the European Commission (EC), including the divestment of Asiana's cargo business, to address concerns regarding potential hindrances to fair competition post-merger. With conditional approval for the merger granted by the EC on Jan. 13, the sale process was initiated.

Market insiders estimate the value of Asiana's cargo division to be between 500 billion ($374 million) and 700 billion won.

Asiana's cargo business unit recorded annual revenue of 1.6 trillion won in 2023, 20 percent of which derived from the belly cargo involving the transportation of cargo carried in the lower deck of a passenger aircraft, requiring the possession of large passenger traffic for the potential buyer.

Moreover, the average age of Asiana Airlines' 11 freighters is 26 years, necessitating further investment by the eventual buyer.

Jeju Air, backed by the conglomerate AK Holdings, is evaluated as the preeminent contender for its financial position and overall suitability for the acquisition, distinguishing it from the other bidders held by private equity firms.

The state-run Korea Development Bank (KDB), the primary creditor of both Korean Air and Asiana Airlines, will soon shortlist qualified candidates and initiate due diligence.

Approval by the EC of the selected buyer is still needed to close the airlines’ merger deal. Once Korean Air completes the acquisition of Asiana Airlines, the actual cargo divestment process will commence.

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