Korean Air and its owner Hanjin Group has announced a KRW 1.8 trillion (£1.2 billion) deal to acquire rival Korean carrier Asiana Airlines.
Hanjin said that the acquisition is expected to create “one of the top ten airlines in the world”, and had been taken “to stabilize the Korean aviation industry, which is suffering from the Covid-19 pandemic”.
The group said that the current situation of South Korea having two full service carriers “gives it a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline”.
It has not been confirmed, but this suggests that the Asiana brand will disappear following the merger.
“Korean Air’s acquisition and the expansion of its routes, fleet and capacity will give the airline the competitiveness to compete with global mega airlines,” said Hanjin Group.
“The merger of the two airlines is expected to further enhance the competitiveness of the Korean aviation industry with more streamlined route operations and lower costs. More slots secured at Incheon International Airport, a transport hub in Asia, through the consolidation of the airlines, may lead to an increase in joint ventures with global airlines and greater transfer demand, which will also spur the growth of the domestic aviation industry.
“Customers will be able to enjoy a wider range of choices in routes and schedules. They will also be able to benefit from more convenient transfer options, integrated mileage and enhanced safety in all areas.
“Also, the acquisition will strengthen Incheon International Airport’s competitiveness as a major hub in Asia by enhancing its passenger and cargo network.”
Korean Air will issue KRW 2.5 trillion (£1.7 billion) of new shares in early 2021 in order to fund the acquisition, with Hanjin KAL receiving a KRW 800 billion (£550 million) investment from Korea Development Bank.
Asiana has a fleet of around 80 aircraft, including 11 A350s and six A380 superjumbos, while Korean Air operates around 170 aircraft, including ten A380s and ten B748-8s.