Completion of 4-Year Merger... Korean Air Becomes Mega Carrier [Birth of a Mega Carrier]

Korean Air and Asiana Airlines Merger Completed
Full Integration Begins After December New Share Acquisition
Emerges as a Top 10 Global Mega Airline

The European Commission (EC) and the U.S. Department of Justice (DOJ) have finally approved the corporate merger of Korean Air and Asiana Airlines. The four-year-long merger of the two major airlines has been completed, creating a mega carrier ranked among the top 10 in the world.

On the 28th, Korean Air announced that it had fulfilled all the preconditions for the EC's conditional approval of the merger with Asiana Airlines. The EC declared that all prerequisites for the merger review had been met, thus concluding the examination. With approvals secured from all 14 mandatory reporting countries, all merger conditions have been satisfied. The long process, which began with the initial merger decision in November 2020, has now come to an end.

As previously disclosed, Korean Air plans to complete the transaction by paying the remaining 800 billion KRW of the total 1.5 trillion KRW subscription payment for new shares of Asiana Airlines (separately, 300 billion KRW in perpetual bonds) by the 20th of next month. Subsequently, Asiana Airlines will become a subsidiary of Korean Air, with a 63.88% stake. About two years later, the two airlines are expected to be fully integrated and operated as one entity.

Achieving Economies of Scale... Ascending as a Mega Carrier

By merging with Asiana Airlines, Korean Air will rise beyond a full-service carrier (FSC) to become a mega carrier ranked within the top 10 worldwide in terms of transport scale. Simply combining the two companies’ performance, as of the end of last year, their combined revenue reached 23.7351 trillion KRW, with operating profit of 2.41 trillion KRW. The combined fleet consists of 239 aircraft (as of the end of October 2024). According to the International Air Transport Association (IATA)’s World Air Transport Statistics (WATS), Korean Air alone ranked 21st in 2021. After merging with Asiana, it will enter the top 15.

With economies of scale established in both passenger and cargo sectors, the airline is expected to wield stronger negotiating power in aircraft procurement and route expansion. First, amid a global shortage of new aircraft supply, the airline will immediately benefit from new acquisitions. It is also considered more advantageous in securing additional aircraft, as manufacturers struggling with backlogged orders tend to prioritize airlines with larger volumes.

The cargo business, which has recently seen increased demand, is also expected to perform well. Although Asiana Airlines’ cargo division is scheduled to be sold to Air Incheon in January next year, Korean Air’s cargo division alone is already regarded as highly competitive. During the COVID-19 pandemic, Korean Air actively responded to cargo demand, and in 2021, its cargo ton-kilometers (CTK), a key performance indicator, reached 10.43 billion km, ranking 5th worldwide.

Various Challenges to Address Including Workforce Restructuring and Mileage Integration

Korean Air plans to operate Asiana Airlines as a subsidiary independently for two years. During this period, the merged company will reorganize its new corporate identity (CI), repaint aircraft, and revise various work systems and workforce structures. Afterward, the two airlines will be fully integrated and operated as one.

Workforce restructuring is considered the biggest challenge. As of the third quarter of this year, the combined workforce of the two airlines totals 26,110 employees, ranking them between 10th and 15th globally by number of employees. During the independent operation period, Korean Air employees are expected to be dispatched to Asiana Airlines to streamline corporate culture and work procedures. Additionally, personnel may be reassigned to subsidiaries of both companies, such as Jin Air and Air Seoul. Furthermore, efforts to redesign the mileage programs of both airlines are also anticipated.