"Insufficient Mileage Redemption Options and Lack of Detailed Explanation"
Korean Air: "We Will Actively Participate to Meet Consumer Expectations"
Korean Air announced that it will "continue discussions" with the Fair Trade Commission regarding the request for additional information on the integration plan for mileage programs with Asiana Airlines.
On June 12, Korean Air stated, "This morning, we submitted the mileage integration plan to the Fair Trade Commission and, in accordance with the Commission's request, we plan to continue discussions." The company added, "However, at this point, it is difficult to disclose specific details or timing."
As a result, Korean Air is expected to supplement the areas pointed out by the Fair Trade Commission and resubmit the integration plan in the near future.
That afternoon, the Fair Trade Commission stated, "The submitted integration plan falls short in terms of the mileage redemption options previously offered by Asiana Airlines, and the explanation regarding the integration ratio is also insufficient." The Commission added, "We determined that it is not sufficient to begin the review process, so we immediately requested revisions and additional information from Korean Air."
The Fair Trade Commission explained, "Given the high level of public interest in this matter, the integration plan must protect the trust of Asiana consumers and ensure that they do not experience any disadvantages. The rights and interests of consumers from both airlines must be balanced." The Commission continued, "Based on these criteria, we will conduct a thorough review and ultimately approve a plan that can satisfy all consumers."
In addition, the Commission stated, "This submission should be seen as the very beginning of the process, similar to the initial receipt of a case." The Commission added, "Going forward, we plan to draft a review report for the committee after the examiner's review and consultation with various stakeholders and experts."
Within the industry, it has been anticipated that the integration ratio for the two airlines' mileage programs will be 1:1 based on "flight mileage."
In previous cases, such as the 2011 merger of United Airlines and Continental Airlines in the United States, the 2008 merger of Delta and Northwest Airlines, and the 2004 merger of Air France and KLM of the Netherlands, the flight mileage of the two companies was integrated at a 1:1 ratio.
However, for "partner mileage" accumulated through the use of credit cards and other means, it is expected that the integration ratio will differ to some extent.
Typically, Korean Air mileage is earned at a rate of 1 mile per 1,500 KRW, while Asiana mileage is earned at a rate of 1 mile per 1,000 KRW. The value per mile that card companies pay to airlines is about 15 KRW for Korean Air and 11 to 12 KRW for Asiana.
The National Assembly Research Service has previously suggested that, considering international precedents, price and service differences, and the potential for expanded mileage redemption opportunities, a reasonable integration ratio should be determined. The Service proposed a 1:0.9 ratio for the integration of flight and partner mileage.
A Korean Air representative stated, "We will actively participate in the upcoming process with a willingness to listen, so that we can develop an integration plan that meets consumer expectations."
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