Amerijet, a mid-tier cargo airline based in Miami, has asked the U.S. Department of Transportation to withhold approval for a startup operator of business jets owned by Korean Air to fly to U.S. destinations because Korean Air is blocking its request to offer scheduled service in and out of South Korea.
And it threw a grenade into Korean Air’s $1.4 billion merger plan with struggling Asiana Airlines, saying the Department of Justice should consider the airline’s behavior toward Amerijet as part of its antitrust investigation.
Korean Air in August objected to Amerijet’s application for scheduled authority, dragging out a process that has lasted nearly seven months and making it more expensive to do business in Korea, the U.S. carrier said in a filing Thursday. Amerijet urged U.S. regulators not to take action on K-Aviation’s request for market access until the Korean Ministry of Land, Infrastructure and Transport (MOLIT) grants permission for it to provide regular service at Seoul Incheon airport.
Amerijet currently operates a route multiple times per week via Seoul as a contractor to Maersk Air Cargo, but the business arrangement faces uncertainty because the Korean government has only issued temporary licenses to operate ad hoc charter flights.
“As a result of Korean’s comments and MOLIT’s inaction, Amerijet has been relegated to operating charter flights to Korea. This requires monthly applications and approvals, which are costly to make and often not given until the last moment. Amerijet’s application for November charter flights is now pending before MOLIT,” Amerijet said in the filing.
Korean Air has 23 freighters in its fleet, including seven Boeing 747-8s and a dozen 777 aircraft. It is the world’s fifth-largest cargo carrier by volume. It is the third-largest carrier when express parcel carriers FedEx and UPS are excluded. Asiana operates 10 Boeing 747 freighters and one 767.
Amerijet said it began providing all required documentation as early as Jan. 17 and that MOLIT officials have all the information about its ownership structure, aircraft and customer needed to make a decision. MOLIT “is still making redundant/duplicative and unduly burdensome requests for information from Amerijet with no sign of when a decision on Amerijet’s application for scheduled operating authority might be forthcoming,” the all-cargo operator complained, adding it has not been provided a copy of Korean Air’s opposing comments or been allowed to respond to them.
K-Aviation Co. Ltd, established in December 2021 as a subsidiary of Korean Air, applied in September for a foreign carrier permit to provide service 10 to 15 times per year between South Korea and the United States, as well as an exemption from the requirement so it can begin flying while the U.S. Department of Transportation processes its request.
The Korean government and Korean Air are violating the U.S.-Korea Open Skies Agreement, which commits both countries to give each other’s carriers a level playing field to compete, the Amerijet filing said.
“It is especially noteworthy that while Korean seeks U.S. approval for its merger with Asiana, it appears to be actively working to thwart Amerijet’s entry into the U.S.-Korea scheduled cargo market. Amerijet urges the Department of Justice to review Korean’s role in delaying MOLIT’s approval of Amerijet’s scheduled cargo license,” Amerijet said in the K-Aviation submission.
Korean Air in late 2020 agreed to take a nearly two-thirds stake in debt-ridden Asiana at the behest of the South Korean government.
U.S. and European Union competition authorities are concerned the combined airline would dominate routes to the U.S. that Korean Air and Asiana currently compete on for passenger and cargo traffic. Korean Air has been reluctant to transfer some routes to other Korean carriers as a condition for approving the merger, but Reuters reported last week that Korean is now willing to sell Asiana Airlines’ cargo business and give up routes to four European cities to gain EU approval for the deal. Meanwhile, the Korean Herald on Friday published a story that Asiana’s board of directors will meet at the end of October to decide whether or not to sell the cargo business.
Amerijet accused the Korean Transport officials of throwing up roadblocks to delay a decision on its license request after Korean Air submitted its complaint. The ministry last month asked the airline to resubmit all previous information because it had a staff turnover and needed to start fresh.
The new request is “intrusive and burdensome” because it “unjustifiably calls for Korean language translations of hundreds of pages of technical legal documents, as well as details of financial arrangements between Amerijet and its customer that extend far beyond normal licensing requirements and what is contemplated by the U.S.-Korea open skies agreement,” the Amerijet filing said.
Being limited to charter flights, Amerijet explained, adds complexity and cost to its business operation. Flights must be requested each month and the availability of operating rights is much more limited than for carriers with scheduled authority. The monthly application process requires legal expenses to be paid each time and Amerijet is not eligible for a waiver of certain airport fees as a charter operator, it said.
Challenging year for Amerijet
Amerijet began providing crews and operating flights for Maersk Air Cargo, the rebranded cargo airline of ocean shipping powerhouse Maersk, last November. Maersk, which has transformed itself into an end-to-end provider of logistics services, provided Amerijet with three Boeing 767-300 purchased directly from Boeing. Amerijet operates one route three times per week connecting Shenyang, China; Seoul, Korea; and Maersk Air Cargo’s hub at Greenville-Spartanburg International Airport in South Carolina. The other two freighters provide six days of service between Hangzhou, China, and Maersk’s other U.S. hub at Chicago Rockford International Airport.
Amerijet has grown this decade from a sleepy regional carrier to one with global aspirations, but the 18-month freight recession that has slashed revenues across the logistics industry has been particularly hard on privately held Amerijet.
CEO Tim Strauss abruptly announced his retirement early this month after a bumpy three-year run. He tripled the size of the fleet to 25 freighters, attracted large customers such as Maersk, hired many executives from outside the company and modernized its IT system. But his approach caused friction with many long-term employees and the airfreight market’s prolonged downturn has cut revenues more deeply than expected.
In June, Amerijet let go 15 office workers as part of an effort to reduce costs in the face of steep revenue declines caused by soft demand and sharply lower rates than last year. Earlier, it closed down its small freight forwarding business, eliminating about 27 jobs in the process, outsourced accounting functions to Trinidad and Tobago, and reduced flight schedules to Brussels, Belgium, and Aruba. Another seven back-office positions that experienced attrition were offshored in September, said Christine Richard, the company’s senior director of marketing.
Richard said Amerijet will increase the frequency of its scheduled Brussels route to twice weekly beginning Nov. 15.
Amerijet has 984 employees, down about 100 people from the year-ago high, according to the latest data from the U.S. Bureau of Transportation Statistics. Some of the difference is likely from new-hire pilots that didn’t successfully make it through the company’s training program.
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Contact Reporter: ekulisch@freightwaves.com
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