Asiana Airlines fails to decide on cargo unit sale

[Courtesy of Asiana Cargo]

Asiana Airlines Inc., South Korea’s second-largest air carrier, held an extraordinary board meeting on Monday to decide whether to sell its cargo business, which is a major consideration in the review of its merger with bigger local rival Korean Air Lines Co., but failed to reach a conclusion on the sale. The company will resume discussions in early November.

During the meeting, Asiana’s board of directors deliberated on whether to agree to Korean Air’s remedial measures that will be submitted to the European Commission (EC) for its approval of the merger. The corrective plan aims to alleviate concerns about restrictions on competition via the sale of Asiana’s cargo business.

It was initially expected that a conclusion would be reached quickly as the board members had already shared their opinions on the sale of the cargo business at their earlier meeting on October 24, but the meeting, which began at 2 p.m., did not reach a final conclusion until 9:30 p.m. due to concerns raised by some external directors about a potential breach of duty for shareholders and resistance from employees to the sale. It was also reported that an internal director, who had expressed opposition to the sale, abruptly announced his intention to resign and did not attend the meeting, adding to the controversy.

Asiana Airlines decided to reconvene the board meeting next month to discuss the approval of the cargo business sale further. If the board approves the sale at next month’s meeting, Korean Air will submit its remedial measures to the EC and provide financial support to Asiana.

Korean Air held its own board meeting earlier in the day and passed a resolution to provide financial support to Asiana Airlines using the 700 billion won ($518.86 million) in down payment and interim payment.