Air Incheon to Acquire Asiana Cargo Division

3 months ago Editor

Air Incheon is set to become South Korea’s second-largest cargo airline, having been selected as the preferred buyer for Asiana Airlines’ cargo business. The acquisition is poised to significantly boost Air Incheon’s competitiveness and market share.

Air Incheon is set to become South Korea’s second-largest cargo airline after being selected as the preferred buyer of Asiana Airlines’ cargo business. Air Incheon emerged victorious over competitors Air Premia and Eastar Jet due to its status as a pure cargo carrier and its ability to mobilize funds. All three contenders reportedly offered close to KRW500bn ($360m) for the acquisition.

The European Commission gave provisional approval to Korean Air Lines’ (KAL) takeover of Asiana Airlines on February 13, conditional upon Asiana divesting its cargo division. Additionally, to mitigate concerns about a long-haul passenger service monopoly to South Korea, KAL is transferring routes between Incheon International and Rome, Barcelona, Frankfurt, and Paris to low-cost carrier T’way Air.

The South Korean government supports the merger of KAL and the heavily indebted Asiana, with KAL chairman and CEO Walter Cho Won-tae aiming to complete the takeover this year.

Air Incheon, Air Premia, and Eastar Jet all have private equity funds as major shareholders and have recruited additional investors for this acquisition. Air Incheon, 51% owned by Socius Private Equity, has partnered with Korea Investment Partners.

Established in 2012, Air Incheon is Korea’s only all-cargo airline, primarily operating within Asia. The acquisition is expected to bolster its competitiveness by utilizing Asiana’s long-haul network to the Americas and Europe, leveraging Asiana’s larger cargo aircraft.

KAL plans to finalize a framework agreement with Air Incheon next month, pending European Commission review. KAL stated that the preferred bidder was chosen through a comprehensive evaluation of factors crucial to the air cargo industry’s growth while maintaining a competitive environment. The sales process is expected to conclude quickly through flexible negotiations.

Air Incheon, which generated approximately KRW70bn ($54m) in revenue in 2023, is anticipated to see significant revenue growth with the acquisition of Asiana’s cargo division. Asiana held a 19% domestic market share as of March 31, trailing only KAL’s 45%. Asiana’s freight operations, which include 11 freighters, generated KRW1.6trn ($1.24bn) in revenue last year.

KAL hopes to fully integrate Asiana by October 2026, pending approval from US antitrust authorities. There is speculation that KAL’s recent negotiations to purchase several B787 Dreamliner aircraft, despite manufacturing defect controversies, are linked to gaining US antitrust approval.

Notably, in March, KAL acquired 33 A350 wide-body jets in a $14bn deal shortly after receiving provisional European Commission approval for the Asiana acquisition.