Post-Merger Focus: South Korea Supports Fair Competition for Airlines
In a landmark move for the aviation industry, Korean Air completed its $1.3 billion acquisition of Asiana Airlines on Thursday, merging South Korea’s two largest carriers to form one of Asia’s biggest airline groups.
The deal, which took three years longer than originally anticipated, grants Korean Air a 63.88% stake in Asiana, making it a subsidiary for the time being. Once fully integrated, the combined entity will account for more than half of South Korea’s passenger capacity and rank as the 12th largest airline globally by international capacity, according to data from Cirium and OAG.
Government Steps In to Maintain Competition
With concerns about reduced market competition, South Korea’s transport ministry announced measures to ensure the aviation industry remains competitive. These include allocating more medium- and long-haul traffic rights to low-cost carriers.
The Fair Trade Commission (FTC) has also implemented conditions to prevent monopolistic practices. One key stipulation requires Korean Air to maintain at least 90% of 2019 seat capacity levels on critical routes. A panel will be formed by March to oversee Korean Air’s compliance with these conditions.
No Layoffs, Business Growth Promised
Korean Air emphasized that the merger would not lead to staff layoffs. Instead, employees in overlapping roles will be reassigned, and the airline projects natural growth through expanded operations.
“The combined organization anticipates business growth, which will naturally lead to increased staff needs,” Korean Air stated, addressing workforce concerns.
Overcoming Challenges to Finalize the Merger
The merger faced delays due to competition concerns, prompting Korean Air to make significant concessions. These included handing over key routes to other airlines and selling Asiana’s cargo operations.
Initially announced in November 2020, the deal aimed to rescue debt-laden Asiana, which struggled during the COVID-19 pandemic. The prolonged approval process makes this the longest airline merger in history.
Future Plans for the Combined Airline
For the next two years, Asiana will continue to operate as a subsidiary before fully merging under the Korean Air name with new branding. Korean Air’s integration strategy includes spreading out flight schedules on overlapping routes, introducing new destinations, and investing in enhanced safety measures.
Additionally, Korean Air plans to merge the frequent flyer programs of both airlines, with a submission to the FTC expected by June 2025. This step is aimed at strengthening the airline’s competitive position globally.
A Boost for Incheon International Airport
The merger is also expected to enhance the capabilities of Incheon International Airport, a major hub competing with Hong Kong and Singapore. Incheon currently ranks as the world’s fourth-busiest airport for international passengers and fifth-busiest for cargo.
Airline Consolidation: A Global Perspective
Airline mergers are relatively rare in Asia compared to Europe and North America, where industry consolidation has been more prevalent. The Korean Air-Asiana merger reflects a growing need for stronger, more resilient carriers in the post-pandemic landscape.
Asiana will hold an extraordinary general meeting on January 16, 2025, to appoint new board directors nominated by Korean Air, marking the next step in this historic merger.
