Korean Air (KE, Seoul Incheon) will buy KRW300 billion won (USD229.2 million) of convertible bonds issued by Asiana Airlines (OZ, Seoul Incheon) in the wake of that airline's board agreeing to sell its profit-making cargo arm. The 30-year bonds carry an annual interest rate of 4.7% The board's decision also triggered an immediate KRW150 billion (USD114.6 million) payment to Asiana.

Approval from the November 2, 2023, board meeting helps clear the way for the European Commission to approve the merger of the two airlines. Immediately after the board's decision, Korean Air reportedly submitted an amended merger proposal to the Europeans and aims to secure their approval by the end of January 2024.

“The two companies have entered into a funding agreement," said a Korean Air spokesperson after the board meeting. "Accordingly, liquidity support will be provided to Asiana Airlines, and Asiana’s management difficulties will be somewhat resolved. "

Details have also emerged of three days of contentious Asiana board meetings last week. One board member resigned ahead of the first meeting on October 30. The third November 2 meeting saw three board directors vote in favour of selling Asiana's cargo arm, one board member voting against it, and one abstain.

There was considerable internal resistance to the cargo divesture because Asiana's cargo operations are profitable and accounted for more than half the carrier's overall revenue last year.

However, the combined cargo operations of Asiana and Korean Air would have a combined 66% plus air cargo market share on routes in and out of South Korea, an outcome the European Commission views as anti-competitive. The sale of Asiana's cargo arm and other concessions made by Korean Air seek to address the European's concerns.

"We will try to get the EC’s approval as soon as possible so we can speed up the approval process of other antitrust bodies,” said the Korean Air spokesperson. Decisions from Japanese and US competition authorities will follow the European Commission's decision early next year.