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Korean Air reveals more details of planned merger with Asiana Airlines
March 31st 2021
Korean Air (KAL) president, Woo Keehong, confirmed industry views it would take two years to fully integrate Asiana Airlines into the company once the proposed 1.8 trillion won (US$1.6 billion) transaction closed. Read More » Under the deal, announced in late 2020, Asiana will become a subsidiary of KAL and the low-cost carrier units of both carriers – Asiana's Air Busan and Air Seoul and KAL's Jin Air – will be integrated into one airline. Woo said full-service KAL and Asiana would operate as two separate entities for two years after the acquisition. There would be one brand, Korean Air, after the integration.
"After we integrate and are fully recovered from COVID-19, we estimate a synergy effect of around KRW 300 billion to 400 billion a year," Woo said. "However, as integration involves considerable cost, we believe it will take about two years to reach a break-even point."
The airline group was working to achieve approval for the deal from competition authorities in nine jurisdictions by the end of the year, KAL said.
It will be necessary to simply the fleet, Woo said, because KAL and Asiana had different engines powering the same aircraft types, but this would not happen immediately after integration, given the significant lead times involved in aircraft deliveries and retirements.
"It will be relatively easier for Asiana Airlines to phase out its aircraft as they have many leased aircraft with contracts that will end within five years," Woo said. "We will continue to simplify our fleet by retiring aircraft older than 20 years and introduce new models."
The overlapping roles of 1,200 employees of the two carriers, identified during the due diligence process, would "not be a problem considering the number of natural reductions such as retirement", Woo said. KAL has said there would be no restructuring of the workforce as a result of the takeover.
