SEOUL - In a move pivotal for Korean Air Co.'s acquisition of its domestic rival, the board of Asiana Airlines Inc., South Korea's second-largest airline, has consented to the sale of its cargo division, aiming to secure antitrust clearance from the European Union.
According to Yonhap News Agency, Asiana disclosed that its board had endorsed the proposal to divest its cargo operations, citing it as a key condition set by the European Commission (EC) for greenlighting the much-discussed merger with Korean Air.
The agreement to sell emerged after a previously inconclusive board meeting, where discord over the disposal of the cargo business delayed the decision. The approval, finally reached with three votes in favor, one against, and one abstention from the five present directors—down from six after the resignation of an internal member opposed to the sale—signals a significant stride towards fulfilling EC requirements.
The EC's scrutiny has centered on potential competition constraints in passenger and air cargo services between the EU and South Korea following the acquisition. A failure to divest the cargo segment might have jeopardized the entire merger, an arrangement that has been under negotiation for three years.
Korean Air is poised to present a comprehensive set of remedies to the EC, now including Asiana's ratified plan to sell its cargo business and the surrender of specific landing slots servicing four European destinations.
While this board ratification marks progress, it doesn't assure immediate EC endorsement of the merger, although it presumably improves the probability of a conditional acceptance.
Thus far, the airline merger has been sanctioned in 11 jurisdictions, such as Britain, Australia, and Singapore. Nevertheless, approvals from three major regulatory bodies—the EU, the United States, and Japan—are still pending. In addition, Korean Air must navigate potential legal challenges from the U.S. Department of Justice, which is contemplating an antitrust lawsuit against the deal due to concerns over its impact on competition within the U.S. market.