In a landmark move for the aviation sector, Korean Airlines has officially completed its $1.3 billion acquisition of Asiana Airlines, marking a pivotal chapter in South Korea’s airline industry. This strategic merger provides Korean Airlines with a commanding 64% stake in Asiana, which was previously the second-largest carrier in the country. The deal is notable for coming to fruition four years after the airlines first announced their intentions to merge amid the economic turmoil caused by the Covid-19 pandemic.
This collaboration has catapulted Korean Airlines to new heights, elevating it from the 22nd to the 11th largest airline globally based on international weekly seat capacity, as revealed in a recent analysis by the CAPA Centre for Aviation. Asiana Airlines, which was ranked 40th prior to the merger, adds substantial capacity to Korean Airlines’ operations. This merger also consolidates the Korean Air Group’s share of the South Korean international market, now standing at an impressive 47%. This percentage reflects a compilation of capacities from Korean Airlines, Asiana Airlines, and their respective low-cost brands: Jin Air, Air Busan, and Air Seoul.
Interestingly, the acquisition does not signify the immediate phasing out of the Asiana brand. Instead, Korean Airlines has articulated a plan to maintain Asiana’s operations while pursuing a complete integration over the next two years. In a move that signifies the merging of resources, Jin Air will absorb Air Busan and Air Seoul. This strategic consolidation hints at a streamlined operational model that aims to optimize resources while maximizing market share.
The successful closure of this transaction followed the European Commission’s approval, which was a significant hurdle given the potential implications for competition in the airline market. Notably, regulatory bodies in key markets such as Japan and China also cleared the merger, although the U.S. Department of Justice’s position remains pending. Korean Airlines’ decision to press ahead with the deal suggests a strong belief that the necessary regulatory approval will ultimately be granted.
In an effort to counterbalance any competitive superiority that this merger might confer, authorities have required Korean Airlines to make certain concessions. One such measure is the leasing of four Boeing 787 aircraft to the rising competitor Air Premia, aimed at enriching the competitive landscape on routes between South Korea and the United States. Currently, Korean Airlines services 11 destinations in the U.S., while Asiana operates five routes, all departing from Seoul. The entry of Air Premia into transpacific flights could stir an intriguing dynamic in this marketplace.
The integration of Korean Airlines and Asiana Airlines is set to reshape the aviation industry not only in South Korea but also on a global scale. As they embark on this transformative journey, stakeholders will be keenly observing how this merger influences market competition and operational efficiency in the coming years.