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Korean Air buys Asiana for $1.62 billion

Korean Air is buying its rival Asiana Airlines in a deal worth 1.8 trillion won or 1.62 billion USD, eventually making Korean Air the world's 10th biggest airline in terms of fleet count.

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Korean Air is set to acquire 30.77% stake in Asiana by buying new shares worth 1.5 trillion won sold by Asiana. The former will also buy bonds to be floated by the latter.

According to Bloomberg, Korean Air's parent company Hanjin KAL Corp. goal is to stabilize South Korea’s aviation industry amid the coronavirus pandemic and improve its competitiveness, said Hanjin Group, which operates airlines and logistics businesses through its subsidiaries. It expects Korean Air to be ranked as one of the world’s top 10 airlines once the deal is completed.

The Hanjin Group is expected to submit a letter to the Korean Development Bank early this week to proceed with the deal.

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Korean Air is also set to integrate all low-cost carrier subsidiaries Jin Air and Asiana's Air Busan and Air Seoul once the acquisition is completed.

Just how big will Korean Air be?

Presently, Korean Air's current fleet is at 169 aircraft, consisting of a mix of Airbus and Boeing jets. Asiana on the other hand operates a fleet of 82 aircraft, also consisting of both Boeing and Airbus jets. 

Bother airlines are also Airbus A380 operators, with 10 being operated by Korean Air and 6 by Asiana. As a result of the very low air travel demand, only 1 A380 from each airline are operating, while the rest are parked.

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It is unreported however if Korean Air will be letting go of some aircraft, particularly some of its A380 superjumbos.

Enhanced competitiveness

One of Korean Air's goal is to stabilize the South Korean Aviation Industry and to improve its competitiveness. According to Hanjin, Korea has two full service carriers, which gives it a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline. Countries with a population of less than 100 million usually only have one full-service airline.

With the acquisition, route operations will be streamlined, costs will go down, while the consolidation of slots at Seoul Incheon International Airport may increase joint ventures with other airlines together with the increase in demand of transit flights.

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