Korean Air’s $1.3 billion acquisition of Asiana Airlines has finalized, forming one of Asia’s largest carriers. This merger raises concerns about market competitiveness and prompts governmental oversight to ensure a balanced aviation landscape in South Korea.
Korean Air now controls a 63.88% stake in Asiana, solidifying the acquisition after a three-year process. The combined entity will command over half of South Korea’s passenger capacity, making it the world’s 12th largest airline by international capacity, according to analyses by Cirium and OAG. This places the merged airline among the top revenue generators in the Asia-Pacific region, rivaling China’s leading state-owned airlines based on 2023 financial data.
To address potential competition issues, South Korea’s transport ministry has introduced measures to bolster the domestic aviation industry. These measures include granting low-cost carriers expanded access to medium- and long-haul routes, as reported by Yonhap news agency. Furthermore, the Fair Trade Commission (FTC) plans to establish a panel by March to monitor Korean Air’s adherence to the merger’s approved conditions.
Key conditions stipulated by the FTC include maintaining seat numbers at no less than 90% of 2019 levels on major routes. Korean Air has affirmed that the merger will not result in staff layoffs, anticipating natural staff growth through business expansion and reassignment of employees within the organization.
The path to acquisition was marked by significant hurdles related to competition concerns. To secure approval, Korean Air made substantial concessions globally, including relinquishing certain routes to competitors and divesting Asiana’s cargo operations. This complex process extended the merger timeline, making it the longest airline merger to date. Initially announced in November 2020, the deal aimed to rescue Asiana from debt burdens exacerbated by the COVID-19 pandemic’s impact on travel demand.
Asiana will operate as a subsidiary for up to two years before fully integrating into Korean Air. While the Korean Air name will remain, the brand will undergo a refresh. The integration strategy includes streamlining flight schedules on overlapping routes, expanding to new destinations, enhancing safety investments, and consolidating into a single low-cost carrier.
A proposal for merging the airlines’ frequent flyer programs will be submitted to the FTC for review by June 2025. Korean Air expects the merger to strengthen its global competitive position and enhance the capabilities of Incheon International Airport, a major international and cargo hub rivaling Hong Kong and Singapore.
This consolidation contrasts with the trend in Asia, where airline mergers are less common compared to Europe and North America. In those regions, regulatory bodies often express concerns about excessive industry concentration. Asiana shareholders will convene on January 16th for an extraordinary general meeting to appoint new board directors nominated by Korean Air. This significant merger marks a pivotal moment in the Asian aviation landscape and will undoubtedly be closely monitored in the coming years.
