Korean Air is set to acquire rival Asiana Airlines, with plans to consolidate into a single flag carrier that will dominate the Korean market.
The agreement will see Korean Air acquire a majority share in Asiana for 1.8 trillion won ($1.6 billion) following an injection via its parent, Hanjin Kal Corp.
Korean Air and Asiana are currently the two largest full-service carriers in Korea, with the merger expected to give Korean Air control of around 60 percent of international routes in South Korea, according to Reuters.
Following the acquisition, the airlines will continue to operate under separate brands, though the aim is to eventually phase out the Asiana brand and integrate it into Korean Air. Asiana Airlines will also likely withdraw from Star Alliance, as Korean Air is a founding member of rival alliance SkyTeam.
Preventing the collapse of Korea’s airline industry
Despite competition concerns, Korea’s antitrust regulator is unlikely to block the acquisition; Korea’s aviation industry has suffered greatly from a fall in demand since the onset of the coronavirus pandemic, and a merger is viewed by many as necessary to stabilise the Korean aviation industry.
Hanjin Group, which operates airlines and logistics businesses through its subsidiaries, believes the merger will improve Korean Air’s competitiveness, explaining that the existence of two full-service carriers in Korea has hindered the airline industry in the country.
“In general, countries with a population less than 100 million have a single full service carrier,” Hanjin said in a statement. “However, Korea has two full service carriers, which gives it a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline.”
According to Hanjin, the merger should streamline route operations and lower costs, while the consolidation of slots at Seoul’s Incheon International Airport may increase joint ventures with global airlines and demand for transit flights. That should also spur growth in the domestic aviation industry.
“Korean Air’s acquisition and the expansion of its routes, fleet and capacity will give the airline the competitiveness to compete with global mega airlines,” Hanjin added.
It expects Korean Air to be ranked as one of the world’s top 10 airlines once the deal is completed.
Along the merger, Korea’s Ministry of Land, Infrastructure and Transport is expected to intergrate subsidiaries Air Busan, Air Seoul and Jin Air, with the combined Low Cost Carrier to operate focusing on regional airports in Korea.
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