Korean Air set to merge with Asiana Airlines

Korean Air set to merge with Asiana Airlines
Photo credit: Newshub

Korean Airlines plans to spend US$1.62 billion to become the top shareholder of indebted Asiana Airlines, in aviation's first major consolidation since COVID-19 brought the industry to its knees.

It will also be the biggest shake-up in South Korean air travel since Asiana's founding ahead of the 1988 Seoul Olympics, with the airline eventually integrated into Korean Air to create a national carrier commanding about 60 percent of international routes.

Working together is likely to give the pair a greater chance of avoiding the fate of several airlines worldwide, where virus-busting restrictions on movement and border closures have decimated passenger demand and forced carriers into bankruptcy.

The deal is also a relief for indebted Asiana which was kept aloft in September by a cash injection from creditors led by the Korea Development Bank (KBD), after top shareholder Kumho Industrial pulled out of a sale.

Korean Air - said it will buy US$1.3 billion of new Asiana shares giving it a 63.9 percent stake, and US$270 million won worth of Asiana's convertible bonds.

With Asiana now joining Korean Air, some 800 to 1,000 roles will overlap. Still, KDB aims to avoid artificial restructuring and ensure job security through natural annual decline in employee numbers.

"For the time being, Korean Air and Asiana will operate as independent affiliates, but once integrated, Asiana's brand will be phased out," a Korean Air spokeswoman told Reuters.

Combining South Korea's two biggest carriers would create the world's 15th largest airline based on the industry measure of kilometres flown by paying passengers, according to 2019 data from the International Air Transport Association. That represents a jump from 28th for Korean Air and 42nd for Asiana.