The CoVid-19 pandemic has spoken on the health of another airline. This morning started with an announcement from Kanjin KAL, the holding company of Korean air, about these entities deciding to acquire Asiana Airlines at a board meeting held on November 16, 2020. Asiana had been on the market for a while, and Asiana parent Kumho Industrial has been trying to sell its controlling stake in the carrier.

Korean Air plans to acquire Asiana Airlines at Korean Won (KRW) 1.8 trillion, which is roughly equivalent to USD 1.625 billion. Hanjin KAL will receive USD 723 million for this transaction from Korea Development Bank. The reason for Korea Development Bank’s investment in Korean Air through Hanjin KAL is to ensure Hanjin KAL maintains its status as the airline’s holding company. Korean Air’s initial investment will enable Asiana Airlines to secure the funding needed for operations until the end of the year, as well as improve its financial position.

As per Hanjin KAL’s assessment, given the crisis the airline industry was currently facing, it was unavoidable to restructure the entire market, including Korean Air, Asiana Airlines, the low-cost carriers such as Jin Air, and relevant industries. The main reason behind Korean Air’s decision to acquire Asiana Airlines at this time, as per its owners, is to stabilize the Korean aviation industry. The Hanjin KAL’s spokesperson said, “Considering that Korean Air’s financial status could also be endangered if the COVID-19 situation is prolonged, it is inevitable to restructure the domestic aviation market to enhance its competitiveness and minimize the injection of public funds.”

Korean Air also reasons that in general, countries with a population of less than 100 million have a single full-service carrier. However, Korea has two full-service carriers, which gives it a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline. Once Korean Air completes its acquisition of Asiana Airlines, the airline is expected to be ranked as one of the top 10 airlines in the world.  However, Korean Air’s acquisition and the expansion of its routes, fleet and capacity will give the airline the competitiveness to compete with global mega airlines.

This will also mean good news for Delta, which has an investment in Korean Air and holds 10% of their equity. On the topic of the existence of the Asiana brand,  Reuters has heard from a Korean Air spokesperson,

For the time being, Korean Air and Asiana will operate as independent affiliates, but once integrated, Asiana’s brand will be phased out.

Obviously, this will also mean that Asiana will exit Star Alliance at some point next year, leading to the Korean market only having a link up with SkyTeam in the future.

Asiana has a fleet of around 82 aircraft, including 11 A350s and six A380 superjumbos, as well as A320 family aircraft. Korean Air operates around 170 aircraft, including ten A380s and ten B748-8s, and Airbus A220s and Boeing 787s and Boeing 787s.

Bottomline

Call it a fire-sale or saving the industry from drowning under CoVid-19, Korea has found a way to consolidate its airlines to ensure there is one big airline to take on the rest of the world. Having said that, when the good times are back, Korean travellers will be at a lack of choice in the times ahead given the consolidation. Korean Air will be in the meanwhile, controlling the local aviation market with no competitors in sight.

What do you make of the acquisition of Asiana Airlines by Korean Air?

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