Korean Air is pushing forward with the domestic sale of Asiana Airlines’ cargo business, which was once considered a major obstacle in the acquisition and merger (M&A) process with Asiana Airlines. The cargo division, previously seen as a vital source of revenue, is now under consideration for a partial sale, leading to concerns about the feasibility of the merger. Amid this situation, major conglomerates with logistics subsidiaries and domestic low-cost carriers (LCCs) are being discussed as potential purchasers.
According to sources in the financial investment (IB) sector on Oct. 11, Asiana Airlines is planning to convene a board meeting by the end of this month to discuss the sale of its cargo business division in relation to the corporate merger with Korean Air. The consideration of this option is aimed at securing approval from the European Union (EU) as well as the United States and Japan for the corporate merger. In June of this year, the European Commission (EC) postponed the approval deadline of the corporate merger review. For Korean Air, streamlining the cargo business, which had raised concerns of a monopoly, is seen as a strategic move and a kind of “last-ditch effort.”
The reason the EC expressed concerns about a monopoly in the cargo business resulting from the merger of these two airlines is due to the fact that Korean Air and Asiana Airlines together occupy a whopping 68 percent of the total cargo aircraft market. According to the Ministry of Land, Infrastructure, and Transport’s Airportal, as of the first half of this year, the total international cargo volume reached 959,352 tons, with Korean Air and Asiana Airlines collectively accounting for 655,383 tons, resulting in a market share of almost 95 percent among national carriers.
Initially, when the discussion of selling the cargo business division came to light, some quarters referred to it as a “half-hearted merger.” However, there are also predictions that divesting the cargo business may not significantly impact the company’s revenue.
The first contenders mentioned for the acquisition of Asiana Airlines’ cargo business division are domestic LCCs. This is because it could present them with an opportunity to explore new revenue streams, considering that LCCs primarily generate income from passenger operations. However, the high market share of Korean Air’s cargo business division lowers its appeal, and given that the financial situation of LCCs has not yet recovered, the likelihood is seen as relatively low.
Because of this, it is speculated that major conglomerates such as CJ Group, which operate in logistics and cargo transportation, are strong contenders. CJ Group was even considered as a potential acquirer back in 2019 when Kumho Asiana Group decided to sell Asiana Airlines.
After CJ Group stated that they had no intentions of pursuing the acquisition, the matter was considered resolved. However, even at that time, there was a prevailing view that anticipated business synergies between CJ Logistics and Asiana Airlines’ logistics operations. The fact that there was a previous connection through the acquisition of Daehan Express from Kumho Asiana Group in 2011 also fueled acquisition speculations. As CJ Logistics is recently looking at the global market as part of its new business strategy, there is speculation that it may opt to expand its presence in the air cargo business.
Meanwhile, Korean Air is said to be preparing to complete and submit its proposed solutions to EC Directorate-General for Competition (COMP) by the end of this month. Following the review of these measures, the EC COMP is anticipated to reveal the results of the corporate merger review.