Acquisition of Asiana Cargo, Three-Way Battle Among Air Premia, Eastar, and Air Incheon

Jeju Air Finally Withdraws
Preferred Negotiation Partner to Be Decided as Early as Early Next Month

Regarding the merger of Korean Air and Asiana Airlines, discussions on the sale of Asiana Airlines' cargo business are scheduled at the board meeting on the 2nd. An Asiana Airlines aircraft is parked at Gimpo Airport in Gangseo-gu, Seoul. Photo by Jinhyung Kang aymsdream@

Jeju Air, the leading low-cost carrier (LCC), did not participate in the final bidding for the sale of Asiana Airlines' cargo division. This is interpreted as due to both their tight financial situation and doubts about the profitability of this investment. As a result, the acquisition competition has become a three-way race among Air Premia, Eastar Jet, and Air Incheon.

According to industry sources on the 25th, Jeju Air ultimately did not participate in the bidding for the sale of Asiana Airlines' cargo business, which closed that day. The AK Group internally decided not to acquire it. Jeju Air stated, "We conducted due diligence according to procedures and reviewed the investment value and acquisition appropriateness of Asiana Airlines' cargo division," adding, "As a result of the due diligence, due to several unavoidable circumstances, there were limitations in preparing a binding acquisition proposal, so we decided not to submit a bid."

Ultimately, the parent company's financial situation appears to have been a stumbling block. As of the end of last year, Jeju Air's cash equivalents stood at approximately 288.2 billion KRW on a separate basis. Considering that the valuation of Asiana Airlines' cargo division is estimated at around 500 billion KRW, this is significantly insufficient. The holding company, AK Holdings, also finds it difficult to provide financial support. AK Holdings has even taken loans using Jeju Air's shares as collateral to secure funds to support AK S&D, which has been posting losses repeatedly since COVID-19. It is reported that Jeju Air's management has expressed reluctance to participate in the acquisition battle.

At one point, the private equity firm MBK Partners proposed to join forces with Jeju Air, but after confirming Jeju Air's intention not to participate, MBK Partners partnered with Air Premia. An aviation industry insider said, "There were widespread rumors from the beginning that Jeju Air was reluctant to participate in the bidding," adding, "In the end, Jeju Air became nothing more than kindling to heat up the acquisition competition."

Thus, all competitors have teamed up with private equity firms to enter the race. Eastar Jet is expected to participate based on a fund established by its major shareholder, the private equity firm VIG Partners, instead of separate financial investors (FIs). There is also speculation about acquisition financing support from Woori Bank and NH Investment & Securities. Air Incheon, the only cargo-dedicated LCC, has partnered with Korea Investment Partners.

Korean Air, which is in the process of acquiring Asiana Airlines, and UBS, the sales agent, plan to evaluate each candidate's submitted price, funding plans, and experience and capabilities in operating medium- to long-haul cargo routes, and decide on the preferred negotiation partner as early as next month.