Korean Air "Asiana Financial Support... Cargo Business Employment Succession"

On the 2nd, when the Asiana Airlines board of directors approved the agenda to separate the cargo business, Korean Air stated, "We have submitted a corrective action plan to European competition authorities, which will serve as a positive opportunity in the remaining merger review process."

So far, the European Commission (EC) has demanded stringent corrective measures due to concerns over cargo sector monopoly following the merger of Korean Air and Asiana. Korean Air explained, "We proposed various corrective plans over a long period, but none were accepted by the EC," adding, "The only alternative to obtain approval for the deal was to submit a corrective action plan involving the sale of Asiana's entire cargo business."

A board meeting was held to discuss the sale of Asiana Airlines' cargo business in relation to the merger of Korean Air and Asiana Airlines. The photo shows the Asiana Airlines hangar set up at Gimpo Airport in Gangseo-gu, Seoul on the 2nd. Photo by Jinhyung Kang aymsdream@

According to the prior financial support agreement between the two companies, Korean Air decided to provide funds to Asiana Airlines. First, after submitting the corrective action plan to the EC, Korean Air plans to withdraw or use the previously paid deposit and interim payments. The deposit and interim payments are known to be around 700 billion KRW. Until the EC grants final approval, these funds can only be used for operating expenses.

Asiana Airlines will issue new perpetual convertible bonds to Korean Air, and immediately after the EC approves the merger, 150 billion KRW out of the 300 billion KRW acquisition deposit will be converted into a performance bond.

Korean Air explained the background for providing funds, stating, "The operating environment has steadily worsened due to international instability, oil prices, and high interest rates," and "Cargo business sales sharply declined after the endemic phase, and financial soundness has continuously deteriorated." It added, "Financial support from the acquiring party is essential to endure the prolonged merger review period."

Korean Air Seosomun Building. Photo by Yongjun Cho jun21@

The Asiana cargo business is being considered for acquisition mainly by domestic low-cost carriers (LCCs). Whether there is an actual interested buyer remains uncertain. However, when selling the cargo business, it was agreed to maintain and succeed the employment of employees in the relevant business division. Korean Air stated, "We will seek sufficient understanding and cooperation from the affected employees and prepare practical measures to reach a smooth agreement." Typically, in such transactions, employees in the business division being sold are given individual compensation as consolation money.

The EC's review process aims to obtain approval by January next year, and procedures will proceed accordingly. In Japan, Korean Air plans to complete the review early next year after negotiating the corrective action plan and submitting a formal notification. It also intends to consult with the United States on corrective measures to alleviate concerns about competition restrictions.

This content was produced with the assistance of AI translation services.