[Asia Economy Reporter Yu Je-hoon] As Hanjin Group considers acquiring Asiana Airlines, the restructuring of the aviation industry, which had been stalled for 10 months due to the COVID-19 pandemic, is gaining momentum. Industry insiders are paying close attention to whether the restructuring triggered by the 'big deal' merger between major airlines will extend to the low-cost carrier (LCC) market, where seven companies are competing.
According to the World Air Transport Statistics published by the International Air Transport Association (IATA) on the 14th, as of last year, the combined international passenger ranking of Korean Air and Asiana Airlines was 10th with 33,457,000 passengers, and their cargo ranking was 3rd with 2,229,000 tons. This means a 'mega carrier' that can stand shoulder to shoulder with global airline groups will be born.
Since 1988, the 'two major private airlines' system, with Korean Air and Asiana Airlines competing, has been established, but industry experts have often observed that a single large airline system would be more suitable considering Korea's population and economic scale. Asiana Airlines found itself in a sandwich situation, competing with Korean Air on long-haul routes and with LCCs, which emphasize low costs, on medium- and short-haul international routes.
If this big deal succeeds, industry consensus is that Korean Air and Asiana Airlines can generate significant synergy effects. The air cargo sector, which became the industry's only source of profit due to COVID-19, can benefit from economies of scale with the world's third-largest supply volume, and if route and slot adjustments are achieved in the passenger sector, maximizing profitability after COVID-19 is also a realistic goal.
A senior official from a national airline said, "The long-haul route networks of the two companies overlap a lot, but currently, there are many cases where even the time slots and aircraft overlap, so the benefits are not significant." He added, "After acquisition and time slot adjustments, it will be possible to target not only domestic passenger demand but also transfer demand from Southeast Asia and neighboring countries, which will be highly beneficial."
The industry expects that if this big deal is finalized, changes will also occur in the seven-LCC system. Currently, the combined international market share of Hanjin affiliates (Korean Air, Jin Air) and Kumho affiliates (Asiana Airlines, Air Busan, Air Seoul) reaches 73.1%, which could raise concerns about monopolistic practices.
First, Air Seoul, wholly owned by Asiana Airlines, is considered highly likely to be integrated given its fleet size (7 aircraft) and route network. Air Busan has been consistently mentioned as a candidate for resale.
The situation for other LCCs outside the two major groups is also unfavorable. Eastar Jet, which failed to merge with Jeju Air, is attempting resale but is facing difficulties, and Fly Gangwon, the latest entrant to the market, is experiencing worsening management conditions, including employee furloughs. Additionally, Jeju Air and T'way Air have conducted rights offerings in preparation for the prolonged COVID-19 crisis.
Professor Heo Hee-young of Korea Aerospace University said, "The domestic aviation industry has been growth-oriented, leading to overinvestment since the 2010s. If restructuring proceeds smoothly and the market is organized into one major airline and two to three LCCs, the Korean aviation market will enter a mature phase."
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