Major: Korean Air & Asiana Airlines To Merge

Filed Under: Asiana, Korean Air

Plans for the biggest airline merger since the start of the pandemic have just been announced.

Korean Air plans to buy Asiana Airlines

Korean Air intends to acquire Asiana Airlines in a deal that’s valued at $1.6 billion, which should be finalized in the second half of 2021. Korean Air is currently the world’s 18th largest airline, and if this deal is complete, the combined airline would become the 10th largest in the world.

Here’s the plan for the takeover, which is quite complicated due to the ownership structures of the companies:

  • Korean Air plans to raise ~$2.25 billion via rights offerings in early 2021
  • Of that money, ~$1.35 billion will be spent to buy new shares to be sold to Asiana, and the balance will be spent on Asiana perpetual bonds
  • Korean Development Bank, the main creditor of Asiana Airlines, will inject ~$722 million into Hanjin KAL, through a rights offering and convertible bonds; in other words, both former parent companies would still have a stake in the combined airline

As Korean Air Chairman Cho Won-tae describes this takeover:

“The company made the decision to help the country’s airline industry continue to grow (amid uncertainties) and minimize the injection of public funds (into Asiana).”

Meanwhile the Deputy Minister for Civil Aviation at the Ministry of Land, Infrastructure, and Transport, has said that this was an “inevitable decision” in order to minimize losses at the two airlines amid the pandemic.

Now, I’d note that while the plans seem concrete as of now, only time will tell if this merger actually goes through, since a lot can still go wrong — will the shareholders ultimately be onboard, and will the deal receive regulatory approval?

Korean Air is acquiring Asiana Airlines

Why Korea’s two major airlines have struggled

The truth is that the financial situation at Korean Air and Asiana Airlines has been problematic since long before the pandemic. South Korea has a population of around 50 million, and the country has two full service airlines, making it one of the few countries of its size with two full service airlines.

That doesn’t even begin to address all the competition in South Korea from both foreign airlines and low cost carriers.

This deal is probably particularly beneficial for Asiana, which has been on the brink of collapse. In September the airline received a cash injection from creditors (led by Korean Development Bank), after the previous largest shareholder pulled out of a sale

South Korea has had two full service airlines

What would the new Korean Air look like?

Assuming this deal gets approval, what should we expect from a combined Asiana and Korean Air? I have a few general thoughts…

Korean Air will be the surviving brand

If the merger is approved, the plan is for the two brands to operate independently in the short term, but for there to eventually be an integration. As it’s described:

  • Asiana and Korean Air would integrate operations, and Korean Air would be the surviving brand
  • The two airlines also have three low cost carriers that would be integrated — this includes Asiana’s Air Busan and Air Seoul, and Korean Air’s Jin Air

Korean Air will probably be the surviving brand

Minimizing layoffs is a priority

Korean Air’s chairman has stated that job security of existing employees at the airlines is the top priority. Now, presumably this is at least partly being done to receive government approval for the deal, but this does suggest that the workforce won’t be shrinking much.

It’s said that the combined airline would have a surplus of 800-1,000 employees. How exactly that’s handled remains to be seen. Presumably the airline won’t be hiring anytime soon, but how will the airline keep excess employees busy?

Good for Delta & SkyTeam, bad for Star Alliance

Korean Air and Delta have a joint venture, as Delta even owns a stake in Korean Air. Given this transpacific joint venture and Korean Air’s SkyTeam membership, it seems highly likely to me that this is the arrangement that would survive.

That means that Star Alliance would lose an airline. Keep in mind that Asiana hasn’t had a joint venture with United, so there’s definitely more upside for the partnership with Delta than anything else Asiana has across the Pacific with a US airline.

It’s likely that Korean Air will remain in SkyTeam

What would a combined fleet look like?

Asiana has a fleet of 81 aircraft, while Korean Air has a fleet of 172 aircraft. A few things stand out:

  • Korean Air has 10 A380s and Asiana has six A380s, so that’s 16 A380s combined; I would guess that the airline won’t retire A380s altogether, but maybe it will reduce the fleet a bit, though there are some destinations where the A380 makes sense, like Los Angeles, New York, etc.
  • The combined carrier’s long haul fleet would be all over the place beyond the A380, as it would include the 747-400, 747-8, 777-200, 777-300, 787-9, A330-200, A330-300, A350-900; there’s also the 787-10 and A350-1000 on order
  • Personally I could see the few remaining 747-400s being pretty quickly retired, and maybe some A330s and 777s would be retired, but otherwise I imagine this varied fleet would be kept

Asiana has a fleet of six Airbus A380s

Bottom line

Korean Air and Asiana Airlines are expected to merge, forming the world’s 10th largest airline. While plans for this have now been formally announced, there’s still a lot of work to be done before this is finalized, so we’ll have to see how this unfolds.

The plan is for Korean Air to be the surviving brand. I would assume that the airline would stay in SkyTeam and maintain its Delta joint venture. There are also lots of questions about the future of the combined carrier’s fleet.

What do you make of Korean Air’s acquisition of Asiana, and how do you see this playing out?

Comments
  1. I’ve got some Asiana points I’ve been saving for a trip to South America (Santiago). Any idea when they would stop these redemptions? 35k each way in business (Polaris) is quite the sweet spot.

  2. Spain has a population of about 50m and has (for the moment, at least) two full-service airlines: Iberia and Air Europa. (Although there are several practical differences between Korea and Spain as far as the air travel market is concerned.)

  3. @BEN – Taiwan has a population of only 23 million i.e. less than half of that of South Korea and still has 2 established full service airlines(China airlines & EVA) and a 3rd airline growing i.e. Starlux.

  4. South Korea has one of the world’s worst safety records when it comes to airlines, just ahead of Taiwan. Both airlines have had fatal crashes and mishaps of the years. It will be interesting to see how these two carriers come together and overcome this. I for one, will never fly either. Watch for UA to launch EWR-ICN once air travel rebounds and perhaps add a second daily SFO-ICN nonstop, daily.

  5. @Hyohwan Taiwan most likely has less competition from Mainland China airlines because of the whole “Is Taiwan China?” situation. While Korea has Beijing just next door and it isn’t a hard connection.

  6. @shoeguy safety, are you even considering the American side of things? Delta alone is accountable for killing more people than that airlines of Taiwan and South Korea combined. I rather die in a reputable Asian airline than suffer in the misery of some righteous aircrew who bothers more on complaining about passengers and their own rights than deliver service which is expected.

  7. As far as I know Korean Air has retired its last 744s already and Asiana has a single example in its fleet, so for sure we won’t see any 744s flying for the ‘new Korean Air’

  8. Wow, big news. I’ve flown Asiana a few times in business class and always found them a solid experience. They also seemed to be an important source of supply for Star Alliance award redemptions for trans-pac and intra-asian flights. As @Ben said, a loss for Star Alliance.

  9. Great for Delta medallion member. Asiana uses T1 at Incheon and KE uses T2 and they’re effing far from each other. I wonder what they’ll do for transfers… maybe asiana will move to T2 as well? Many domestic market will be reduced though and LCC will have to fight it out.

  10. ABOUT TIME Korean Air changed its livery. Woefully outdated and has never been brought up to be with the times, unlike KLM and EVA. The new merged airline needs to have a consistent and cohesive identity, which it doesn’t.

    Of course, there’s a pandemic going on and there are way bigger money problems at KE than a livery, but that doesn’t stop me from talking about it, and I have always felt that KE has one of the worst liveries out there, especially on the A380.

  11. Keep in mind that even some “common” fleet types have differences. For example, KAL’s A380s have GP7200s whereas Asiana’s A380s have Trent 900s. Asiana’s 744s have CF6 engines while KAL’s 744s have PW4000. Both KAL and Asiana have A321Neos on order and while it’s certain that KAL’s A321NEOs have PW1000Gs, who knows whether Asiana has decided on PW1000 or LEAP.

  12. Hope KE doesn’t get rid of their 747s…granted, these only serve a very small handful of routes, but J upstairs is such a treat.

  13. I personally like the KE livery. It’s a breath of fresh air in a sea of white. China Eastern and JAL are so boring.

  14. I’ve been a *G through Asiana Club for years. I wonder if/when it merges with KE Skypass, what are other easy *G options. It seems that there’ll be a major update to KE Skypass on Feb 1, 2022, so it makes sense if they merge the two programs at that time (suppose the merger completes by then). The new Skypass gets you skyteam elite plus for 40k miles per annum, which seems reasonable (forbid any caveats I don’t know, and honestly, I know nothing about skyteam), but I still prefer SA just for their better asia pacific connections.

  15. I also like the KE livery. The sky blue stands out and the taegeuk on the tail is distinctive and classic. The only part I’m not a fan of is the font for “Korean Air” which I do think could use some updating.

  16. I have never been a fan of KE. Their lounges are horrifying (especially LAX, which is a Priority Pass mill), and the fact that I can only credit miles to SkyTeam left me in the most-rapidly-devaluing ecosystem available.

    That said, Asiana was in a death spiral, so something needed to happen. I was one of the last passengers to take first class on LAX -> ICN. The business cabin feels like ‘economy class with more space’ on subsequent trips. I was thinking about transiting with ANA through Narita on my next trip to Seoul to avoid them… I guess that’s a certainty now.

  17. I had just switched to OZ Asiana Club last year after UA made it incredibly much harder with their PlusPoints to attain any kind of status. I now have 10000 OZ points that am not sure what to redeem for if at all.

  18. Uh oh. Last year I transferred 50K points from Chase to Asiana in an ill-fated attempt to book Lufthansa First Class from Europe-US. Interesting to see what those points will be worth once I’m able to fly again.

  19. Hmm, the real question is: when will KE have some decent wifi onboard? I hope OZ will bring over some expertise…

  20. It has always amazed me how South Korea could support so many airlines. Two full service carriers, each with their own low-cost subsidiaries (Jin Air, Air Seuol, Air Busan) as well as three other low cost airlines (Eaststar, Jeju, and T’way). Granted, the country is politically an island – as you cannot take ground links to get anywhere since North Korea is in the way. So all international travel is either via boat or plane. But it seems as though the amount of capacity was still very high. As is the case with most (geographically) smaller countries that heavily rely on int’l to int’l connections, it makes sense to see consolidation at this time. Let alone the fact that both OZ an KE (or at least parent Hanjin) were struggling before the pandemic.

  21. what will happen to all our Asiana points? I have 400k that I was supposed to use this summer. Getting worried.

  22. This sucks, as I’m a diamond member and I’m less than 4k miles short of having though points for a free business class booking. On top of that, I’m due to remain diamond until 2023 are the very least, courtesy of their generous program. No interest in flying with any of the skyteam airlines, as they don’t fly where I normally need to get to. 2020 really sucks…

  23. Doubt it will really happen, but if it does I would like the whole operation to move to Star Alliance, not SkyTeam, which is a useless alliance for the vast majority of frequent flyers.

  24. @glenn t Don’t speak for everyone else. Claiming something is useless for “the vast majority” without proof just makes you look like an idiot.

    Star Alliance still has ANA as an East Asian hub. If anything this balances the three alliances, with KE on SkyTeam and JAL on OneWorld.

  25. I find the statement that Korea only has 50M people and two full service airlines thus making two airlines unsustainable rather incorrect or misleading.

    Canada has 38M and ostensibly has two full service – WS and AC. Though you might claim that WS lacks some full service aspects it is still as good as AS.

    But the real contradiction is the UAE which has two very full service airlines in EY and EK. And the ‘real’ National population if the UAE is 1.18M. (The population of the UAE is listed as 9.46M in 2020 but only 11.48% are UAE Nationals). (Even if you include the expats the population ratio between the two would be 50:9)

    So one would think that Korea and UAE have a similar airline structure (mostly international) but have extremely different populations. In normal times both EK and EY would be sustainable if they weren’t trying to outdo one another.

  26. Jan – he speaks for me. Where do you see outsized value in SkyTeam redemptions? I credit to partners like VA when flying Delta.

  27. I have lifetime Diamond Plus status at Asiana, which also meant, lifetime *G.
    I sure hope they remember their loyal customers when arranging the merger of the frequent flyer programs.
    Sad!!

  28. Uggh. I guess this isn’t the most surprising thing in the world but as an Asiana/Star Alliance loyalist, I am not a fan. Skyteam is easily the worst alliance in terms of the quality of member airlines and consumer friendliness (first class awards not being standardized, elite benefits across carriers). Even outside of the Star Alliance to Skyteam difference, the loss of Asiana Club will be huge for me. They are BY FAR the best frequent flyer program I’ve ever seen when it comes to elite status: 40,000 miles for Star Gold and you get TWO years to do it! That’s 10,000 miles less than the typical standard for that level and you get twice the amount of time to reach it. I’m a AVgeek and miles/points enthusiast but I’m also young and in college so therefore I don’t fly nearly as much as many readers here. Asiana Club was the only program across any of the three alliances where I could realistically get an elite status that would grant me lounge access, extra baggage, and more. Their redemption rates are also extremely reasonable; I’m currently looking at a partner first class award from Southeast Asia (either BKK or SIN) to the US for under 100K miles. You don’t see that kind of value much anymore. Their award search tool on their Korean website was also extremely useful since it allowed you to search segment-by-segment and with custom dates meaning even complex itineraries were easily bookable online.

    I hope at the very least this deal takes several years to go through and the most ideal scenario for me would be for it to fall through completely, which as you pointed out is very possible given the complexities.

  29. @Jan (or is it Karen?)
    My comment is my opinion as is clear, and speaks for no-one else, although I am not alone in thinking this, as you can see.
    I suspect you’ve had a bad week and are probably thinking everyone except you is an idiot.
    Which is rather funny!

  30. Lucky, a post on what happens next for Asiana’s programme would be useful. A lot of us have credited to it for years to get Star Alliance lifetime gold, but I suspect that lifetime may not turn out to mean lifetime?

  31. Could it be that they’ll keep both brand identities separate such as in the AF/KL merger ? Also what will happen to Asiana Mileage ? I use them for Star Alliance status and I’m already elite plus for life on Skyteam….. man that sucks !!!!

  32. It’s sad. For Europeans SkyTeam is no choice as there is only one quality airline (AirFrance/KLM) located here.

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