News Backgrounder
Korean Air president outlines acquisition timetable for Asiana merger
April 1st 2021
In a frank and detailed online briefing last month, Korean Air (KAL) president, Woo Keehong, confirmed a full merger of its former rival, Asiana Airlines, into the KAL fold would take two years. Read More » “There will be one brand, Korean Air, after the integration,” he said.
“We created a post-merger integration plan (PMI) after thoroughly conducting due diligence with the support and cooperation of the Korea Development Bank (KDB) and Asiana Airlines.
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“The PMI was submitted to the KDB on March 17 and is being modified and updated.”
The Korean flag carrier created 20 working groups, made up of experts from the carrier and external lawyers and auditors, to review all facets of Asiana Airlines operations. Staff at Asiana and 10 companies affiliated with the airline were interviewed as part of the process. The extended due diligence took three months to complete from the beginning of December last year, Woo said.
The PMI also details the process of integrating KAL, Asiana and LCCs, Jin air, Air Busan and Air Seoul.
The trio of budget carriers will become one airline, Woo explained. “We are still considering whether the integrated LCC will be a subsidiary of KAL or of Hanjin Kal, as Jin Air is. We will decide on the timeline and direction after thoroughly reviewing details such as required funds and restrictions under the Fair Trade Act. It is still too early to disclose the location of the integrated LCC headquarters,” he said.
Integration of the two international airlines required “dozens of projects to be carried out simultaneously”, Woo said. They included safe operations, integration of IT and accounting systems, frequent flyer mileage programs and resolving global alliance issues. KAL is a SkyTeam member. Asiana has been with Star Alliance since 2003.
“Therefore, we expect it to take approximately two years to complete the integration after Asiana is incorporated as a subsidiary of Korean Air,” Woo said.
“Since it is a network-based business, synergy of networks, aircraft and human resources will be very limited if the two airlines operate independently,” he said. “Full integration is the best way to maximize the acquisition and will be the only way to retain and secure employment for the long-term.”
The integration “will create a governance structure where the holding company, Hanjin Kal, owns subsidiary Korean Air and Asiana will be controlled by Korean Air”, KAL said.
| KAL president reveals benefits of Asiana Airlines buyout • As a single brand, Korean Air intends to establish an effective global network at Incheon International Airport • The connection network for cargo will be strengthened by the integration of the fleets and networks of the two airlines with the goal of building Seoul into an important global logistics hub • KAL customers will have more choice of destinations and flight frequencies and therefore earn and use more mileage points • Increased operating profits by cancelling redundant routes and enhancing connectivity • Consolidation of facilities, staff, aircraft, terminals, sales teams etc. will reduce costs • Improving efficiency by operating 10% fewer aircraft, while providing the same capacity, and utilizing remaining aircraft for new destinations and flight schedules • MRO will operate as an internal part of the company, not as a separate corporation, with the business for an enlarged KAL forecast to increase |
Gena McKnight says:
June 20th 2021 11:06pm