A “mega carrier” expected to be created in Korea after the European Commission gave a go-ahead to Korean Air’s acquisition of Asiana Airlines on Nov. 28, clearing the toughest hurdle toward the merger.
A 36-year period in which the two national flag-carriers have been operated will likely end soon, with the impeding creation of a mega carrier ranking 11th in the world.
If the United States does not dispute with the matter, Korean Air’s merger with Asiana Airlines is to be wrapped up by the end of this year.
The consolidation of the two airliners is expected to have a competitive edge in the global market through economies of scale, as they are predicted to log some 20 trillion won in sales.
A report on global aviation transportation statistics, released by the International Air Transport Association (IATA), showed that the simple merged entity of Korean Air and Asiana Airlines wound place it 11th in terms of international passenger transportation.
Most of the top 10 carriers in the world are mega carriers, which have grown through M&As.
An aviation industry official said airliners are an industry of economies of scale being operated based on massive investments, and these mega carriers have played a leading role in the global aviation market.
The realigning of airliners, particularly those in the United States and Europe, has been brisk since the late 2000s.
Delta Airlines of the United States has become the largest airliner in the world by acquiring Northwest Airlines. Lufthansa of Germany became a mega carrier through M&A among six airliners.
If Korean Air’s business combination with Asiana Airlines creates a mega carrier, it is expected to see the competitiveness of the merged entity soar.
A Korean Air official said, “Korean Air will raise a competitive edge through rationalizing of aviation routes and retrenchment.”
A view of Korean Air Boeing 737-8.
Currently, Korean Air has 158 aircraft and Asiana Airlines has 80 aircraft, so the merged carrier will have a fleet of 238 aircraft.
The two airliners posted a combined 21,107.2 billion won in sales and manpower of 27,470 employees as of 2023.
A Korean Air official said the Korean merged carrier would build a foothold to compete with global mega carriers following the merger and consumers would be given more opportunities to choose transit routes and schedules and see more benefits, such as consolidation of mileages.
Korean Air has been undergoing reviews on the merger from 14 countries since November 2020, when the national flag carrier announced its planned acquisition of Asiana Airlines.
The EU was the 13th entity to gave the go-ahead to the merger, and only the United States, the last country, remains.
The United States has no review process, unlike other countries. A Korean Air official said that if the United States does not agree, the country would file an anti-trust complaint.
Korean Air has already informed the United States of Europe’s approval of the merger.
If the United States does not oppose, the review process on the business combination between Korean Air and Asiana Airlines would end.
Even with the U.S. approval of the merger, all related procedure will not finish. Korean Air will have to acquire 131,578,947 shares or a 63.9 percent stake in Asiana Airlines and make the latter into a subsidiary of the merged entity by paying out 800 billion won in the remaining investments until Dec. 20.
Korean Air will finally consolidate the two brands after operating Asiana Airlines two years.
A Korean Air official said the merged carrier will consolidate mileage systems of the two airliners and carry out a merger of three low-cost carriers (LCCs) - Jinair, Air Busan and Air Seoul.
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