A Korean Air passenger jet takes off at Incheon International Airport in this undated file photo. Yonhap
Mileage, job security remain concerns
By Lee Min-hyung
Korean Air’s high-profile acquisition of Asiana Airlines is nearing completion after the European Union’s (EU) competition authority granted approval for the deal, Thursday.
According to the nation’s flag carrier, the European Commission (EC) concluded its review of Korean Air’s fulfillment of all required conditions to acquire cash-strapped Asiana.
The approval paves the way for the long-awaited launch of the mega carrier, as the U.S. Department of Justice (DOJ) is expected to conclude its review of the merger and grant approval in line with the EC’s decision.
Korean Air said it submitted the EC approval to U.S. authorities and plans to finalize the transaction by the end of December.
“Korean Air satisfied all conditions set by the EU competition authority,” an official at the carrier said.
In February, the EC granted conditional approval, requiring Korean Air to meet two preconditions: the operation of a replacement carrier on four overlapping European routes and the sale of Asiana’s cargo business.
In response, Korean Air designated T’way Air as the replacement carrier for the four routes from Incheon to Barcelona, Frankfurt, Paris and Rome. Air Incheon was also picked as a preferred bidder to purchase Asiana’s cargo business.
Korean Air plans to inject 800 billion won ($573 million) and secure a stake of 63.9 percent in Asiana on Dec. 20 to finalize the long-delayed acquisition. Asiana Airlines will then be incorporated as a subsidiary of Korean Air.
Aircraft from Korean Air and Asiana Airlines are parked at Incheon International Airport, Oct. 30, 2023. Korea Times file
The two airlines will be operated separately for the next two years, during which Korean Air will normalize Asiana’s financial condition and relocate workers. A combined entity will be launched later.
The combined airline will become the world’s seventh-largest mega carrier in terms of passenger volume. As of the end of October, Korean Air and Asiana Airlines collectively operated 203 passenger jets, with a total of 35 cargo aircraft during the same period.
The two airlines’ low-cost carriers (LCC) will also be merged afterwards. Both carriers operate Jin Air, Air Busan and Air Seoul as their LCC subsidiaries. When the three subsidiaries are integrated, the merged entity will rise to become the largest LCC here by sales.
However, there are still a series of pending tasks for Korean Air to resolve. First, Asiana employees continue to express concerns about whether Korean Air will guarantee their job security after the deal.
Earlier, Korean Air pledged not to implement any compulsory job cuts during the takeover of Asiana. However, industry officials remain skeptical of this pledge, as many employees from both airlines will be performing similar duties redundantly following the acquisition.
Korean Air is also facing a dilemma over how to merge the mileage points from both carriers.
“The mileage points of the two carriers are unlikely to be integrated at a one-to-one ratio, as Korean Air’s points are generally valued higher in the market,” an aviation industry official said. “However, Asiana’s customers will likely complain if their mileage points are valued significantly less in the merger. It will be challenging to find a fair middle ground.”
Korean Air announced the acquisition plan in November 2020, and has since filed notifications regarding the deal to a group of 14 competition authorities abroad.
The carrier said it will soon hold an event to share details on how to alleviate such lingering concerns after the acquisition.
The combined operating profit of the two carriers surpassed 730 billion won in the third quarter.