Deadline Approaching... Delayed Sale of Asiana Cargo

Extension of Due Diligence Schedule for Acquisition Candidate
Delayed by More Than Two Weeks from Original Contract Date
Appears to Have Favored MBK's Late Entry

The sale process of Asiana Airlines' cargo division is being delayed beyond the original schedule. With expectations that the preferred bidder selection may extend beyond this month, Korean Air, which must finalize the contract next month and submit the sales agreement to the European Union (EU), has become anxious. There are also speculations that, to meet the final contract signing schedule, the number of preferred bidders may be reduced from two to one, contrary to the initial plan.

According to industry sources on the 17th, UBS, which is overseeing the sale of Asiana Airlines' cargo division, recently extended the due diligence period. Currently, due diligence is being conducted on Air Premia, Eastar Jet, and Air Incheon, who have participated in the main bidding, to more thoroughly assess route plans and operational capabilities, leading to the extension of the deadline.

As a result, the selection of the preferred bidder, originally scheduled for this month, may be postponed to next month. In this case, Korean Air could face urgent pressure. The initial plan was to select two preferred bidders in early May, sign a legally valid contract by the end of June, and report to the EU in July. The delay of more than half a month has tightened the timeline.

There is also a forecast that only one preferred bidder may be selected, contrary to the plan. From the start, selecting two preferred bidders was considered unusual. The process of selecting two and then narrowing down to one was seen as unnecessary.

The biggest beneficiary of the schedule delay is MBK. Air Premia, together with its major shareholder, private equity firm JC Partners, partnered with MBK Partners Special Situations (SS) Fund II and reportedly submitted a Letter of Intent (LOI) just before the bid deadline on the 25th of last month. Unlike Eastar Jet and Air Incheon, who declared their intention to participate early, Air Premia selected an advisory firm only after submitting the LOI, effectively buying more preparation time. There are even criticisms that the seller seems to be accommodating MBK, who joined the bidding the latest.

Air Premia has secured ample financial resources by partnering with two private equity firms. It is also the only bidder with experience in long-haul cargo transport. However, a weakness is the current shortage of aircraft; it only has five passenger planes and no dedicated cargo aircraft.

Air Incheon, partnered with Korea Investment Partners, is the only domestic cargo-dedicated low-cost carrier (LCC), but its experience is limited to short-haul routes such as China, Japan, and Southeast Asia, which is a disadvantage. Eastar Jet is the largest among the three candidates in terms of company size but lacks cargo transport experience, which is a limitation.