News / Formal bids invited to take over Asiana Airlines' cargo unit

The takeover battle for Asiana Airlines’ cargo business has taken a new direction now sale handler UBS has begun inviting formal bids.

South Korean low-cost carrier Aero K, a subsidiary of chemical manufacturing conglomerate Daemyung Chemical, announced yesterday that it would bid for Asiana’s cargo unit.

Aero K (Korea backwards), began operations in 2021 and has only intra-Asia passenger services, using six Airbus craft. The airline, whose base is Cheongju International Airport in North Chungcheong province, plans to enter the cargo business by acquiring Asiana’s cargo unit.

The carrier said: “North Chungcheong province is trying to develop Cheongju International as a cargo base for the central region, and we’re considering starting flights from Incheon International (the main gateway to Seoul), so synergy is expected in various aspects.”

Another Daemyung subsidiary, retailer Cowell Fashion, acquired domestic parcel delivery firm Logen in 2021 and, with a manufacturing and delivery distribution network, anticipates more synergies by entering the air freight business.

Bidding for Asiana’s freight operations went into full swing after the European Commission approved Korean Air Lines’ (KAL) proposed takeover of its compatriot peer on 13 February, on condition Asiana offload its cargo arm.

The South Korean government wants KAL and the heavily indebted Asiana to merge, now only approval from the US antitrust authorities is still pending and KAL chairman and CEO Walter Cho Won-tae said he hoped to complete the takeover this year.

Meanwhile, Jeju Air, once viewed as the strongest contender to take over Asiana’s freight unit, has reportedly backed off. But another all-passenger carrier, Eastar Jet,  controlled by private equity investor VIG Partners, is still in the running, as are low-cost cargo carrier Air Incheon and another LCC, Air Premia.

The latter two are now seen as the best candidates to absorb Asiana’s cargo unit, as they are already licensed to operate air freight businesses.

Air Incheon is reportedly hoping to become South Korea’s second-largest airline by bringing in Asiana’s cargo unit, which operates nine 747-400Fs and one 767F, according to CH Aviation, and is valued at between $382m and $535m. The new owner will, however, have to take on its debt of more than $760m.

Except for Aero K, the other three suitors for Asiana’s cargo unit are backed by private equity investors, so will have to mobilise their shareholders to raise the war chest.

Domestic PE fund Socius Aviation is understood to be behind Air Incheon, while Air Premia’s largest shareholder is a consortium comprising Seoul-based PE firms AP Holdings and JC Partners.