The merger of Korean Air and Asiana Airlines, which has received the final go-ahead from the US regulatory authorities, will create huge opportunities for the Korean travel industry, said Bo Young Song, senior vice president, passenger business division, Korean Air.
Speaking at WiT Seoul, he said, “Other industries can grow off a large aviation industry, we can have a global hub in Incheon, I am confident Korea will grow as an economy, and we need to make sure that Next Generation-worthy businesses continue to grow in Korea.”
The merger has been four years in the making.
From the announcement of the merger in January 2021, Korean Air has navigated a complex regulatory process involving approvals from 13 countries. As of late 2023, 11 nations, including major Asian markets, had greenlit the merger. The remaining hurdles were with the European Commission (EC) and the United States.
The EC granted conditional approval in August 2023, addressing concerns over overlapping routes. Korean Air ceded key routes to T’way Airlines, ensuring competition in the short-haul market. For cargo, a significant business unit, Asiana sold its cargo operations to comply with antitrust requirements. These steps culminated in the EC’s formal endorsement in December 2023. And a few days ago, the US gave the green light.
At WiT Seoul, Bo said that after December 20, “Korean Air would acquire 63.9% of Asiana and the next day, Asiana will become a company within Korean Air”.
Korean Air plans to integrate the operations of its LCC subsidiary Jin Air Co. with those of Asiana’s budget carriers, Air Busan Co and Air Seoul, creating the country’s largest low-cost airline with a fleet of 55 aircraft and 2.5 trillion won ($1.8 billion) in sales as of 2023. The three low-cost airlines combined operated 14.9% of Korea’s international flights last year.
The merger will also create the 10th biggest airline in global fleet size.
Harmonisation between longhaul and shorthaul routes, biggest difference in loyalty
Bo said the integration aims to harmonise Korean Air’s strength in long-haul flights with Asiana’s diverse short-haul routes, including its extensive coverage in China.
The combined network will be Korea-centric, with plans to maintain diversity while increasing frequency. Shuttle-style services between key markets, such as Japan and China, and enhanced long-haul routes are envisioned. High-frequency flights, such as those between Gimpo and Haneda, aim to cater to the region’s burgeoning demand.
“We want to create a convenient network, diversified services that are friendly for the user. The biggest difference will be the loyalty programme, there won’t be much difference in network and direction.”
The joint venture with Delta Airlines serves as a model of deeper airline partnerships, Bo said. Unlike traditional alliances, this JV involves shared profits and costs, enhancing connectivity and service quality. New routes, such as Salt Lake City, will debut in June 2024, further strengthening ties with the US market.
Slow and steady does it with NDC
The airline is also taking a slow, deliberate step in the rollout of its NDC programme. Citing American Airlines as an example of what can go wrong with an aggressive approach, Bo said, “We will take a gradual, step by step approach. We won’t be rushing into things.”
Bo mentioned a timeline of June next year. “We want to focus on our customers. Korea is a unique market, it has a unique digital ecosystem, we want to support localisation for the Korean market while meeting global standards.”
He dismissed fears that the merger would create a monopoly. Every airline has to innovate, he said. “The game is changing, without tech improvements, none of us will survive. Our biggest competitors are the market and ourselves.”
As to whether Incheon International Airport can compete with the likes of Istanbul, Dubai and Changi, Bo said, it needs policy support at the government level as well as tech and infrastructure improvements. “You cannot have people waiting 20 minutes to go through immigration or security.”
While he acknowledged it did not have the geographic advantage of Singapore as a bridge between Europe and Asia, Incheon can play to its US-Asia connectivity.
His biggest concern is talent. “We are suffering from a shortage of workers. In Narita, I see a lot of workers from South-east Asia. Our biggest roadblock is government policy and industrial decisions.”
Source: WiT