Before the end of the year 2024, Korean Air reported it completed its acquisition of its fellow South Korean carrier Asiana Airlines (Asiana) – just over four years after it was first announced. The
Before the end of the year 2024, Korean Air reported it completed its acquisition of its fellow South Korean carrier Asiana Airlines (Asiana) – just over four years after it was first announced. The acquisition – called “a strategic milestone for Korea's aviation history” by Korean Air – has been a long process. Each have their own reasons entering into the merger. While it saved Asiana, Korean Air went through the acquisition process that ended up becoming one of the longest in the aviation industry. After a major investment and sacrifices, Korean Air can now somewhat claim its prize.
The Story of the Korean Air-Asiana Merger
During the mid-to-late 2010s, Asiana went through financial difficulties and an accounting scandal. Facing large debt and rising costs, the Korea Development Bank (KDB) would become the company's main creditor and provided support to the airline worth around KRW 1.6 trillion (~USD $38.9 billion) in 2019. While keeping the airline in business, Kumho Asiana Group (Kumho) – Asiana's parent company – was given two conditions: improve the airline's financial situation which would lead to its sale within three years. Kumho then announced it put its majority 33.47% stake in Asiana (68.7 million shares) for sale. It attracted major players among South Korea's chaebols for Kumho's flagship property.
At first, two companies emerged as the front-runners to acquire Asiana - Hyundai Development Company (HDC) and Aekyung – the parent company of South Korean budget airline Jeju Air. HDC would be named the preferred bidder of the initial bidding process in 2019. The following year, the COVID-19 pandemic would ground a majority of airline operations globally. Like its global counterparts, Asiana was heavily impacted by the pandemic. HDC requested for a review of Asiana's finances before going further towards the end of the summer of 2020. As a result, HDC would not continue the process to acquire Asiana.
While the situation for Asiana was looking bleak, Korean Air would enter the picture. In November 2020, Korean Air's parent company would announce it would acquire the majority stake in Asiana. In addition to satisfying regulatory and financial obligations at home, Korean Air would seek the approval for the merger from 13 other countries. Both South Korean airlines, the government, and stakeholders hoped the acquisition would go smoothly. Instead, it would be drawn-out process that would last more than four years.
During the past four years, some of the biggest hurdles that Korean Air faced during the acquisition process was from countries where both Korean Air and Asiana operate a majority of the passenger and cargo flights from Korea. The biggest concerns were raised in North America, the United Kingdom, and the European Union (EU). Korean Air had to address the concerns of competition regulators, and concessions were made. The biggest concessions were made for the EU, where Korean Air gave flight slots to help smaller South Korean budget airline T'way Air launch new flights to four European destinations – Barcelona, Frankfurt, Rome, and Paris. Asiana's cargo business would also be sold to cargo airline Air Incheon.
Then just more than four years since the initial announcement,on December 12, 2024, Korean Air announced the completion of its acquisition of Asiana. Korean Air would take in 131,578,947 newly issued shares of Asiana – representing a 63.88% ownership of the competitor. With investments through third-party capital increase totaling around KRW 1.5 trillion (~USD $36.5 billion), Asiana would also become a subsidiary of Korean Air. While the transaction is complete, the work is not done. The combined airline now has new business to address – the integration of both airlines' fleets, network, staff, and frequent flyer programs – which are expected to be completed in two years.
Network/Fleet Overview
Korean Air is the bigger of the two South Korean airlines serving 111 cities in 40 countries (10 domestic/101 international) , while Asiana serves 84 (6 domestic/78 international). Excluding their subsidiaries, the combined fleet totals over 200 aircraft. Korean Air has the bigger fleet – 159 aircraft compared to Asiana's 68.
There are similarities – but also some differences in their networks and fleets. Both airlines operate the Airbus A380 superjumbo and Boeing 777s. Among the noticeable differences is Asiana operates a mostly Airbus aircraft fleet. Meanwhile, Korean Air has a long history of operating Boeing aircraft from the 777 and 787, to the 737 MAX. Korean Air does however also operate Airbus aircraft such as the A321neo, and has orders for A350s.
When it comes to route optimization, much of the focus will on international flights to/from Incheon Airport. Among the similarities are services to major markets such as in Europe, Japan, China, and North America. Both airlines also help fill some gaps by each other. Asiana's unique destinations include Cairo, Almaty, and Melbourne. Korean Air adds in more routes to the Middle East (Dubai), Asia (Kaoshiung, Macao, Denpasar, Kuala Lumpur), and North America (Canada- Vancouver, Toronto; US - Atlanta, Boston, Washington-Dulles, Chicago, and Las Vegas).
More Changes Expected
While operating separately for the time being, Asiana is expected to exit from Star Alliance as it gets folded into Korean Air – a member of SkyTeam. After more than two decades, Star Alliance will no longer be represented locally in South Korea. Despite losing a North Asia hub in Seoul, Star Alliance still has its Tokyo hubs - Haneda and Narita - where it is represented by All Nippon Airways (ANA). Korean Air reported it will submit an integrated frequent flyer program framework to the Korean Fair Trade Commission by June 2025 which will cover points transfer and frequent flyer status from the Asiana Club program. Further details for the frequent flyer program changes are expected to be announced later.
As for the nearly 30,000 employees of both airlines (Korean Air ~20,000, Asiana ~10,000), Korean Air states the integration will proceed without workforce restructuring. In its statement, Korean Air said: “The combined organization projects natural staff growth through business expansion, with employees in overlapping functions being reassigned within the organization.”
Other eventual changes expected to take place are the integration of both airline's IT systems and organization. The budget carrier subsidiaries of Asiana – Air Seoul and Air Busan – are expected to be integrated under Korean Air's Jin Air brand. According to a report from the Korea JoongAng Daily, Asiana's flights – along with Air Busan and Air Seoul – to/from Incheon Airport will arrive and depart from Terminal 2 starting in the second half of 2025.
Korean Air and the Future of South Korea's Aviation Industry
Korean Air and Asiana are formidable airlines in their own right, though now combined we will get a South Korean supercarrier – both in passenger and cargo air traffic. While forming the supercarrier, we will see a reduction of airlines based in the country from the current 10 to 7. According to data from Cirium, Korean Air/Jin Air will form a majority 49% of the country's international seat capacity.
Image Credit: Pang Yee Huat (LinkedIn - data from Cirium)
To encourage competition, South Korea's government could provide new incentives for airlines – both local and foreign – for new routes and increased flight frequencies. While Korean Air will seek to optimize its fleet and network, it could open up new opportunities for other airlines to fill the gaps that could be created. While losing a local airline alliance member, other Star Alliance member airlines could also take advantage of any programs created to promote additional international flights to/from South Korea.
The future Korean Air/Jin Air will be the dominant airline in terms of international seat capacity in South Korea, with the closest competitors are Jeju Air (9%) followed by T'way (7%). Despite the dominance, Koreans still have multiple competing choices with five local airlines and their foreign-based counterparts for overseas travel. With a recent history of new startup airlines, local business groups still can form new competitors to Korean Air and Jin Air. Even with the dominance of South Korea's aviation industry by Korean Air and Asiana before the merger, it has not deterred the country's budget airlines from bringing their own challenges to the duopoly – something that will not change going forward.
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