Asiana Cargo Sale "Final Decision Early Next Month"

Unresolved Board Meeting
Merger Remedial Plan Submission to EU Delayed
Concerns Over Breach of Fiduciary Duty in Sale
Opposition to Sale Presents Strong Arguments

The Asiana Airlines board, which had been continuing discussions related to the sale of the cargo division and the merger, failed to reach a conclusion. The board plans to continue the meeting in early next month. Due to the delay in the board's decision, Korean Air has requested understanding from the European Union (EU) Commission and decided to postpone the deadline for submitting the corrective action plan.

Asiana Airlines' board of directors was unable to make a final decision on the merger with Korean Air on the 30th. They plan to reconvene in early November to reach a final conclusion. The photo shows Asiana Airlines' headquarters in Osoe-dong, Gangseo-gu.
[Photo by Yongjun Cho jun21@]

On the 30th, Asiana Airlines held a board meeting from 2 p.m. and reviewed Korean Air's corrective action plan to be submitted to the EU Commission regarding the merger for nearly eight hours but failed to complete the vote. After a recess in the afternoon, the board resumed at 6 p.m. but still could not reach a conclusion. The corrective action plan included the split sale of Asiana Airlines' cargo division.

The company stated, "We discussed all agenda items to ensure stable employment for all executives and employees of Asiana Airlines and its subsidiaries and to enhance corporate and shareholder value," adding, "Due to a lack of consensus on conflict of interest issues among some directors, the agenda could not be voted on and was recessed. The board will reconvene in early November to make a final decision."

Korean Air held a board meeting on the same day and announced, "We approve the submission of the corrective action plan related to the new share subscription contract worth 1.05 trillion KRW." The corrective plan includes support measures for alternative airlines to enter four European passenger routes (Frankfurt, Germany; Paris, France; Rome, Italy; Barcelona, Spain) and the plan to split the cargo division after the merger. It is also reported that a support plan for Asiana Airlines using the 700 billion KRW contract deposit and interim payments was approved.

The Asiana board was attended by five members: inside director Won Yu-seok, CEO of Asiana Airlines; outside directors Bae Jin-cheol, former chairman of the Korea Fair Trade Mediation Committee; Park Hae-sik, senior research fellow at the Korea Institute of Finance; Yoon Chang-beon, advisor at Kim & Chang law firm; and Kang Hye-ryeon, emeritus professor at Ewha Womans University Business School. Jin Kwang-ho, head of the Safety and Security Office and one of the two inside directors, recently submitted his resignation for "personal reasons" and did not attend.

Asiana Airlines' board of directors was unable to make a final decision on the merger agenda with Korean Air on the 30th. Accordingly, Korean Air requested understanding from the European Union (EU) Commission and applied for an extension of the deadline to submit corrective action plans. The photo shows Korean Air Seosomun Building.
[Photo by Yongjun Cho jun21@]

With the resignation of Director Jin, who was known to oppose the sale of the cargo business, it was expected that the board's conclusion would proceed quickly. However, the board failed to reach a conclusion as the pro-sale directors and the opposition, concerned about potential breach of fiduciary duty toward shareholders in the event of the sale, clashed. The pro-sale side argued that if the merger does not succeed, Asiana Airlines would struggle to survive independently and thus requires capital injection after the merger. On the other hand, the opposition claimed that since the cargo division still accounts for a significant portion of revenue, selling it could cause losses and potentially constitute breach of fiduciary duty.

Korean Air's deadline to submit the EU corrective action plan is 8 a.m. on the 1st of next month, Korean time. Accordingly, Korean Air plans to request understanding from the EU Commission and reconsider the schedule. The corrective action plan will only take effect after approval by the Asiana Airlines board. Korean Air intends to apply for an extension of the submission deadline today, and it expects the EU Commission to grant a sufficient extension.