Korean Air, Asiana Airlines to fully merge by YE24

Korean Air (KE, Seoul Incheon) and Asiana Airlines (OZ, Seoul Incheon) aim to fully unite later than previously planned, in 2024, according to a draft of the Post-Merger Integration plan, seen by local media, submitted to the state-run Korea Development Bank which is overseeing the deal. Under the plan for the merger, which will end a 36-year duopoly in South Korea’s full-service air travel market, the flag carrier will complete the acquisition of its smaller rival’s assets by the end of 2022, but the airlines will continue to operate as separate units for two years before fully uniting. The draft was disclosed by Park Yong-jin of the ruling Democratic Party on March 28. During the two-year transition period, overlapping routes, staffing, and businesses will be streamlined and rationalised. Korean Air had planned to complete the merger next year, after acquiring a 63.9% stake in Asiana for KRW1.5 trillion won (USD1.32 billion) by the end of June 2021. The delay to 2024 is due to a number of obstacles still in the way, including the as-yet-undetermined future for the two entities’ low-cost units Air Busan, Air Seoul, and Jin Air, as well as having to allay monopoly concerns. It must wait to obtain approval from eight antitrust authorities in territories the airlines operate to, besides South Korea itself. Documents were reportedly submitted in January to the United States, the European Union, China, Japan, Taiwan, Thailand, Turkey, and Vietnam, but only Turkey has so far approved the merger. Besides Korea, a minimum of four approvals are needed. If Korean Air fails to win approval, it could be banned from operating in countries that reject the merger, sources told the Korea Times. Korea has an open-skies agreement with the US, but some of the routes there will have to undergo changes. For example, as part of Star Alliance, Asiana Airlines jointly operates Seoul Incheon―San Francisco, CA with United Airlines (UA, Chicago O’Hare) and the two partners codeshare on routes to New York JFK, Los Angeles Int’l, and Seattle Tacoma Int’l. But in the post-merger scenario, Asiana will become part of Korean Air and Skyteam, which will presumably halt these partnerships with United – and complicate the antitrust investigation by the US authorities. An unnamed source close to the matter told the Korea Times: “Currently most of the routes Korean Air and Asiana operate in the same destination are in close proximity, with some departures just 10 minutes apart. Once the merger occurs, the time slots will most likely be made further apart to better maximise profitability and provide customers with more options.”