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Asiana Airlines Makes Profit, Merger Remains Uncertain
As the airlines around the globe recorded a profit after the pandemic, South Korea’s Asiana Airlines wasn’t left behind and posted a net profit of 1.8 billion won ($1.36 million) in the second quarter of 2023.
The sales reached 1.57 trillion won in the second quarter, but operating profit still dropped 48.5% year-on-year due to rising cost and foreign exchange loss. After lifting the travel restrictions, the sales of the airline recorded a 112% increase year-on-year from passenger travel. The cash-strapped airline recorded a loss of 54.36 billion in the first quarter of the year.
It came days after Korean Air’s second quarter finance result. The flag carrier posted an operating profit of 468 billion won. Korean Air is optimistic about the third quarter of the year and enhances its services by increasing flight operations to meet the travel demand.
Merger With Korean Air
Korean Air and Korea Development Bank (KDB), the main creditor of Asiana, are working to acquire Asiana Airlines. However, Korean Air slowed its stride after submitting its request to the US and EU.
“We will do our best to win the final approvals after finishing negotiations with the antitrust authorities,” Korean Air said.
The acquisition is by no means a done deal. Earlier, Korean Air requested the EU extend the deadline to October, trying to offer more remedies to get the approval. The EU originally decided to deny the merger in early August and raised concerns over the competition. The merger has continued to undergo scrutiny by the bloc.
In addition, US is concerned that a merger with Korean Air could have a monopoly on cargo transportation services. The decision potentially could affect the stability of the supply chain, such as with semiconductors. The two Korean airlines currently have a combined market share of 95%.
In response to the concerns about the monopoly, KDB says it will consider offloading Asiana’s cargo section to boost the acquisition. The potential buyer could be T’way Air, a budget carrier in the country. The no-frills carrier currently operates without cargo services. Asiana Cargo owns a wide variety of aircraft, ranging from Airbus A320 to Boeing B747-400SF.
“There have been talks, but nothing has been decided,” T’way Air said after a meeting.
But KDB is reluctant to sell the cargo section and believes the valuation of Asiana will drop. Asiana could maximize synergy with the cargo section. Meanwhile, KDB denied the rumor of selling Asiana to a third party.
After nearly three years of announcing the merger, Korean Air got 11 green lights from competitors’ authorities, including the UK, Australia and Singapore. The acquisition needs three more approvals from the US, EU, and Japan to be done.
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