Now departing for a merged airline: What's next for Korean Air, Asiana

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Now departing for a merged airline: What's next for Korean Air, Asiana

Published: 12 Dec. 2024, 16:38 Updated: 12 Dec. 2024, 17:24

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

Korean Air and Asiana Airlines' planes are stationed at Incheon International Airport. [NEWS1]

Korean Air acquired 64 percent of Asiana Airlines Thursday, subsuming it as a subsidiary to finally conclude the four-year-long takeover deal between the country's two largest full-service carriers.

Still, the flag carrier will have to meet a few rules set by the Fair Trade Commission (FTC) regarding a ban on increasing airfares and adjusting a mileage transition ratio unfavorable to some customers.

Korean Air said Thursday that it fully completed the merger with Asiana after acquiring 131.6 million shares, or 63.9 percent, for 1.5 trillion won ($1.06 billion), wrapping up the takeover saga that began on Nov. 16, 2020.

Korean Air will run Asiana as a subsidiary for two years before evolving into a merged airline by 2026.

“The integration strategy includes network optimization through diversified flight schedules on overlapping routes, service expansion to new destinations and enhanced safety investments," Korean Air said in a statement. "It will proceed without workforce restructuring, with employees in overlapping functions being reassigned within the organization."

A Fair Trade Commission official explains its new guidelines for a merger of Korean Air and Asiana Airlines at the Sejong government complex in Gyeonggi, on Thursday. [NEWS1]

Asiana Airlines will name new executives in a shareholder meeting planned for Jan. 16, with Song Bo-young, head of the passenger business division at Korean Air, reportedly a strong candidate for CEO of Asiana.

Starting in the second half of next year, Asiana passengers will fly in and out of Terminal 2 at Incheon International Airport. The airline's two budget carriers, Air Busan and Air Seoul, will also move to the Sky Team-dedicated terminal.

Asiana passengers will be able to use their mileage until the merged entity is formed. After that, the mileage of both airlines will be integrated, though the transition ratio has not been decided on.

The FTC announced Thursday that it will monitor the airlines to prevent a violation of certain rules, including those pertaining to mileage integration, before the comprehensive merger plan is released, as well as to ensure that airfare hikes above 2019 prices do not exceed the rate of inflation.

Korean Air has to submit its comprehensive plan for mileage integration within six months, and the FTC must give it the green light within the two years preceding the full merger.

Industry insiders speculate that the transition can’t come in at a 1:1 ratio as the rate of accumulation varies and Korean Air mileage is more valuable than Asiana’s in the market. While one Korean Air mileage point is earned for every 1,500 won spent, it only takes 1,000 won to accrue one Asiana mile.

The Korean government in March promised the merger would “never harm customers, even with one mile."

Available international routes will be upped. The FTC ruled that Korean Air must maintain at least 90 percent of the total available seats in 2019. The Ministry of Land, Infrastructure and Transport also said Wednesday it would lead and support Korean Air in opening new routes to the Irish capital of Dublin, Copenhagen in Denmark and other emerging markets in Latin America.

Some of the two airlines' U.S. and European routes overlap as they both operate flights between 10 a.m. to 2 p.m. Departure times will likely be changed after the merger, with some moved to later in the afternoon.

The merger could place Korean Air among the ten biggest airlines in the world, beating Japan Airlines. The new integrated airline will own a total of 238 aircraft, of which 203 are passenger planes, with some 27,500 employees including 9,000 flight attendants. The amalgamated carrier will have 186 operational routes with Korean Air’s 114 and Asiana’s 72.

The merger will also lead to a merger of three budget carriers: Korean Air-owned Jin Air, and Asiana’s Air Seoul and Air Busan.

BY SARAH CHEA [[email protected]]