On 13FEB24, the EU Commission approved the 1.8-trillion-won (USD 1.4 billion) merger deal between Korean Air and Asiana Airlines, announced in 2020. As a precondition for okaying the deal, Brussels competition watchdogs demanded Asiana Airlines to sell its cargo arm. Under the control of Switzerland-based UBS, one of the world’s largest asset managers and investment banking service providers, the bidding process for Asiana Cargo has now begun.
There are well-known applicants standing on the list of potential buyers, that has been open for interested parties since the middle of last week. In addition to cargo-minded Air Incheon, the file includes the names of the domestic Korean low-cost carriers, Eastar Jet and Air Premia. According to local market observers, Juju Air has given up its original intention to place a bid.
Bids must be submitted before FEB ends
How serious the interests of the applicants are, remains to be seen. Local experts indicate that some of them might have thrown their company’s hats into the ring to take a look into Asiana Airline Cargo’s books and learn business specifics. Whether it is an intended act of legal industrial espionage, will become clear at the moment when they have to submit a proposal aimed at fully taking over the cargo arm of Asiana Airlines. UBS and seller, Korean Air, have given the bidders an extremely short timeframe to submit their preliminary bid proposals – until the end of February, so within the next five days. This includes submitting detailed plans how they intend to finance the takeover and what role Asiana’s cargo arm will play in their corporate business considerations, among others.
Asiana Cargo will be history come OCT24
Once this task is accomplished, seller Korean Air plans to put together a shortlist of the final group of preferred buyers, followed by finalizing the entire sales process by OCT24 – at the latest.
Asiana Cargo operates 11 freighters, mostly B747-400F, including three chartered cargo-only aircraft, and earned 1.6 trillion won last year, accounting for 25% of the company’s overall sales. However, despite the latest earnings, the cargo arm is heavily in debt. This means that, in addition to paying the purchase price, a buyer would also have to cover the accumulated debts. Meanwhile, these have gone through the roof, amounting to the equivalent of 702 million euros. A sum that puts enormous pressure on the purchase price, which market analysts estimate to be in the range of 500 and 700 billion won. For comparison: 100 euros equals 143,000 Korean won.
Air Incheon is considered the favorite bidder
Currently, the airlines mentioned as prospective buyers are considering various methods to source funding, including utilizing the financial strength of their major shareholders or forming consortia with strategic investors to proceed with the acquisition plans.
In terms of operational and strategic requirements, local Korean aviation experts consider Air Incheon to be the most suitable candidate. The airline intends to expand its cargo business and position itself as the clear number two in Korea, alongside top dog, Korean Air, not only for passenger transports but also for cargo ground and air services.
