Asiana Airlines joins Korean Air as subsidiary

Asiana Airlines Inc., one of South Korea’s only two full-service carriers, has passed into history after 36 years of operation to be placed under its bigger crosstown rival Korean Air Lines Co. as a subsidiary, paving the way for the birth of one of the world’s top 10 airlines.

Korean Air on Wednesday paid the remaining 800 billion won ($559 million) to close a long-delayed deal signed in 2020 to take over cash-strapped Asiana Airlines for 1.8 trillion won.

Following the deal closing, Korea’s No. 1 national flag carrier controls the largest 63.9% stake in its former smaller rival, which will be placed under its wings as a subsidiary on Thursday.

The deal was completed after the European Commission, the region’s antitrust body, gave the final nod to the merger of the two Korean national flag carriers.

For a smooth transition into a one-brand airline in two years, the parent carrier is expected to promptly kick off the consolidation process, starting with a reshuffle of Asiana Airlines’ executives to combine the two airlines’ operations and build a united brand.

Asiana Airlines’ new chief executive is expected to be appointed at an extraordinary shareholders’ meeting in mid-January.

With Asiana Airlines under its arm, Korean Air plans to seek out new routes and add flights to existing routes if necessary to give consumers more choices.

CAUTION AGAINST MONOPOLY

In response to the birth of the mammoth full-service airline, the Korean government plans to prepare measures to prevent a monopoly in the country’s aviation industry.

The country’s antitrust watchdog Fair Trade Commission (FTC) will set up a commission before March next year to monitor Korean Air's implementation of its agreed measures with the FTC.

The two airlines’ marriage received approval from the FTC in 2022 on the condition that they relinquish airport slots and traffic rights for some of their lucrative routes, which will be allocated to local budget airlines.  

They are also banned from raising flight rates, slashing the number of flight seats or reducing services such as free baggage allowance. They should not also change their mileage systems in a way that puts their customers at a disadvantage.

Korea’s Ministry of Trade, Industry and Energy also plans to secure additional traffic rights on mid to long-haul routes to Europe and Southwest Asia, dominated by Korean Air and Asiana Airlines, to allocate them to low-cost carriers (LLCs) to promote healthy competition in the aviation industry.

The Korean government will also give LLCs priority access to routes to China, Japan and Southeast Asia, let go by Korean Air to gain approval for its merger with Asiana Airlines.

To help Korean Air and Asiana Airlines bolster the competitiveness of their united entity, the government will encourage them to consolidate redundant routes and open new routes to other promising markets in Europe such as Dublin, Ireland and Copenhagen, Denmark.

Write to Jung-Eun Shin at newyearis@hankyung.com

Sookyung Seo edited this article.