Korean Air: Merger with Asiana Airlines postponed until 2024

Research and compiled by : Rose, Quality Orange Tourism / http://www.minhangshi.com/m/h5/detail/9322149 / Direct translation

The post-merger integration (PMI) plan submitted to Korea Development Bank (KDB) shows that Korean Air has postponed its merger with Asiana Airlines until 2024. However, Korean Air still plans to acquire Asiana Airlines in 2022, but the two airlines will not be fully integrated until 2024. It is understood that the delay is related to the antitrust approval of multiple agencies around the world.

Korean Air’s PMI plan expresses its vision to establish a single integrated Korean Air in 2024. Korean Air plans to acquire Asiana Airlines before the end of 2022, but the two airlines will still operate as separate entities and will not be fully merged until 2024. Korean Air originally planned to acquire Asiana Airlines before 30 June 2021.

Korean Air plans to operate Asiana Airlines as a subsidiary before the full merger. Korean Air itself is also a subsidiary of the holding company Hanjin Group. After Asiana Airlines becomes a subsidiary of Korean Air, its own subsidiaries including Air Busan (44.2%), Air Seoul (100%) and Asiana Sabre (80%) will become 'son companies' of "Kaljin KAL". 

According to Korean law, a subsidiary of a holding company must have a 100% controlling interest in its subsidiary. Otherwise, they are forced to sell their shares within two years after the acquisition by a holding company. However, if Asiana Airlines is fully integrated into Korean Air, it will not be bound by this legal provision.

During the two years of transition to full integration, Korean Air will evaluate staffing, business operations and routes to maximize efficiency. In early March, Korean Air raised 3.3 trillion won (approximately US$2.92 billion) through the issuance of new shares, of which 1.5 trillion won (approximately US$1.35 billion) will be used to support the acquisition of Asiana Airlines, and the Korea Development Bank also will provide 730 million US dollars for this transaction.

The factor causing the delay in the merger is a potential antitrust issue. Korean Air’s 63.9% stake in Asiana Airlines is being reviewed by antitrust agencies from eight different countries. So far, only Turkey has approved it, but other countries or organizations, including South Korea, the European Union, the United States, and China, have yet to announce their decisions.

In order for the merger to proceed, Korean Air will need the approval of at least four antitrust agencies outside South Korea. If Korean Air does not obtain sufficient approvals, it may be banned from flying in certain countries or regions. The merger may disrupt the code sharing of Star Alliance on several US airlines, and the US antitrust authorities may include it in the decision-making scope.

As international travel has fallen sharply compared to before the epidemic, Korean Air has been hit hard by its reliance on international routes. Although many airlines around the world have been able to rely on domestic aviation as a source of income, South Korea's relatively small domestic market has not brought hope to South Korean airlines.

Professor Hurr Hee-young of Korea University of Aeronautics and Astronautics said, "Unlike China, the United States, and Japan, South Korea’s domestic aviation market only accounts for less than 10% of the revenue of major airlines. Therefore, Korean airlines must resume international travel to maintain aviation. With the development of the industry, under the current circumstances, South Korea’s aviation industry may continue to struggle.” (Compilation: Pin Orange Tourism Rose)