News / Asiana unions and its debts a challenge to sale of cargo arm to Air Incheon

An Asiana Cargo 747F © Kova1ev

Asiana Airlines pilots’ opposition and the carrier’s debt level appear to be presenting challenges to the sale of its cargo wing to Air Incheon.

Today, the unions representing Asiana’s pilots and other employees warned that attendants on cargo flights would resign en masse in a bid to prevent the merger.

On 17 June, Air Incheon was named the preferred bidder for Asiana’s cargo arm, fending off rivals Eastar Jet and Air Premia. All three candidates were said to have each offered close to KRW500bn ($360m), but Air Incheon reportedly won due to it being a pure cargo carrier.

The EC provisionally approved the takeover of Asian Airlines by compatriot Korean Air Lines (KAL) on 13 February, on condition Asiana offload its cargo arm.

And to address the concerns of a monopoly of long-haul passenger services to South Korea, KAL is transferring passenger routes between Incheon and Rome, Barcelona, Frankfurt and Paris to compatriot low-cost carrier T’way Air.

The South Korean government wants KAL and the heavily indebted Asiana to merge; now, only approval from US antitrust authorities is pending.

However, Asiana’s pilots’ union chairman Choi Do-sung has urged the airline’s main creditor, Korea Development Bank, and the EC to review the merits of the merger. He said: “The selection of a small cargo airline called Air Incheon is a stepping stone for KAL to monopolise the cargo sector.

“The average age of Asiana Airlines’ B747 freighters is 26.6 years. It’s doubtful that Air Incheon’s private equity funds will be able to continue to invest and maintain employment.”

And Asiana Airlines Workers Union chairman Kwon Su-jung added: “KAL hopes to create a ‘mega-carrier’ by taking over Asiana, but this is undermined by transferring some passenger routes to other airlines and hiving off Asiana’s cargo business. It’d be more realistic for Asiana to survive on its own or to be sold back to a third-party group company and grow.”

Meanwhile, Air Incheon is apparently insisting on not taking on any of the debt attached to Asiana’s cargo unit, as a condition of the acquisition. Air Incheon’s shareholders expect substantial expenditure will be made to replace Asiana’s aging freighters.

Air Incheon’s paid-up capital stands at KRW17.91bn ($13m), and South Korean media, citing investment banking sources, have reported that its main shareholder, Socius Private Equity, would inject around KRW400bn ($290m) to absorb the operations of Asiana’s cargo arm.

A source at Air Incheon told The Loadstar that, while talk of additional funding could not be confirmed, it would definitely not up its offer price for Asiana’s cargo unit. Socius PE is backed by South Korean engine parts maker Inhwa Precision.

A KAL spokesperson told The Loadstar: “Korean Air is committed to employment security, a fundamental prerequisite in the acquisition and integration of Asiana Airlines.”

Regarding the non-transfer of debt, the spokesperson added: “Korean Air is in discussions with the preferred bidder, Air Incheon, and cannot confirm details at this stage.”