Asiana Agrees to Sell Cargo Unit in Takeover by Korean Air

Asiana Agrees to Sell Cargo Unit in Takeover by Korean Air

Korean Air’s plans to take over rival Asiana Airlines have cleared a major hurdle after the No. 2 carrier agreed to EU demands to sell off its cargo unit first.

Asiana’s board of directors on Thursday agreed to a revised plan by Korean Air to sell off its cargo business after the takeover in order to appease EU concerns of damaging competition in the airline industry.

In a meeting earlier this week Asiana’s board failed to agree to the plan, but on Thursday three out of five members gave it the green light.

Korean Air will also accept EU demands to cede some of its European routes to low cost carrier T’way Air and has submitted a new takeover plan to the European Commission. 

So far, Korean Air has won approval of the takeover from 11 out of 14 countries and regions but it still needs the green light from Japan, the EU and the U.S. The EU had made the most demands.  

Korean Air and Asiana Airlines planes sit on the tarmac at Incheon International Airport on Thursday. /Yonhap

The EC is now expected to approve the takeover in January, and Korean Air will then seek the approval of the U.S. and Japan to acquire a 63 percent stake in Asiana by the end of next year.

Expecting resistance from Asiana and T’way staff, Korean Air has promised to guarantee their jobs. 

That will potentially turn it into a huge force with 230 aircraft generating W20 trillion in annual sales to rank among the world’s top 10 airlines (US$1=W1,343). 

Korean Air controls 24 percent of flights at Incheon International Airport and Asiana 16 percent. The two carriers have competed on international routes by offering flights to similar cities at around the same time slots. Korean Air flies to 108 cities in 36 countries and Asiana flies to 63 cities in 23 countries, but 80 percent of their flights overlap.

With the takeover Korean Air will be able to adjust the flight schedules to offer a wider range of options to travelers.

Korean Air has raised W3.3 trillion from a paid-in capital increase in 2021 and will use W1.8 trillion of that money to buy the stake in Asiana. The deal is expected to be completed in 2026.  

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