Korean Air will take over rival Asiana Airlines in a $2.2 billion buyout to turbocharge the South Korean flag-carrier and catapult it to become one of the world's largest airlines.
The Hanjin Group conglomerate, which owns Korean Air, today confirmed the acquisition, which will be part-funded by a $990 million investment from the Korea Development Bank, with the airline raising the remainder through shares and bonds.
In a statement issued by Hanjin, the group said the deal will "stabilize the Korean aviation industry, which is suffering from the COVID-19 pandemic."
"Considering that Korean Air’s financial status could also be endangered if the COVID-19 situation is prolonged, it is inevitable to restructure the domestic aviation market to enhance its competitiveness and minimize the injection of public funds."
Hanjin indicated that both brands would remain, with the "two full service carriers (giving) a competitive disadvantage compared to countries like Germany, France and Singapore with a single major airline."
PREVIOUS [November 13, 2020] | Korean Air is said to be in talks to buy up rival Asiana Airlines in what would be a massive shake-up of South Korea's aviation industry.
Asiana has struggled for several years, and in June revealed its carried debts exceed US$11 billion.
South Korean media are reporting that Hanjin Group, which owns Korean Air, is in discussions with Korea Development Bank – Asiana’s largest creditor – to buy the troubled airline, and plans to submit a 'letter of intent' to the bank this month.
A spokesperson for Hanjin Group has told media that nothing has yet been decided.
The purchase of Asiana by Korean Air would mark the country's number two airline as another aviation casualty of Covid-19, and rob Star Alliance of a major partner in East Asia, as Korean Air belongs to rival SkyTeam.
Asiana was already on the market before Covid-19 struck, with a consortium of Hyundai Development and Mirae Asset Daewoo planning to buy the airline for US$2.25 billion in December 2019, but the deal collapsed in the wake of the coronavirus pandemic and its impact on Asiana.
Synergies between Asiana Airlines, Korean Air
Both Asiana and Korean Air have an extensive fleet of twin-aisle aircraft, with significant overlap between the two.
The world's largest passenger plane, the Airbus A380, is one such jet operated by both – Asiana has six, Korean has ten – with the Airbus A330-300 also a workhorse of the two, with Asiana having 15 and Korean Air having 21 A330-300s, as well as eight smaller A330-200s.
Boeing 777s also feature in each airline's fleet. Korean Air has 44 in total, split across 26 Boeing 777-300ERs, four Boeing 777-300s, and 14 Boeing 777-200ERs: the latter of which, Asiana has nine.
Both airlines have older planes that would be progressively phased out, although Asiana maintains a larger count of ageing jets with one Boeing 747-400 and 15 Boeing 767-300s, and Korean having just two Boeing 747-400s in passenger format.
When it comes to newer and more fuel-efficient planes, however, the two airlines charted two different paths.
Asiana opted for the Airbus A350-900, which it had been using on flights to and from London (with 11 in its fleet), while Korean Air counts 10 Boeing 787-9s among its ranks, which were being used on routes to Sydney and Brisbane prior to Australia's border closure.
Continuing on the Boeing track, Korean Air is also one of just three passenger airlines to fly the 'new jumbo', with 17 Boeing 747-8s, which the airline also flew to Sydney on occasion, in addition to its Airbus A380s at peak times.
Asiana's fleet includes just six single-aisle Airbus planes, versus Korean Air's preference again for Boeing, with 28 Boeing 737s, plus 10 of what were originally Bombardier C Series jets, but are now branded as Airbus A220s.
Similarities in premium passenger service
Back in 2019, both Asiana Airlines and Korean Air confirmed a significant winding back of first class service in the sky.
Asiana decided to follow the lead of Malaysia Airlines the year prior, rebranding first class as 'Business Suites' – still being better than standard business class, but without the 'first class' name as many corporate travel policies prohibited.
In the same month, Korean Air stopped selling first class on some of its aircraft, including Airbus A330s and Boeing 787s as had been flying to Australia, recognising that the first class seats Korean had been offering on these jets were already near-identical to business class.
Korean does still offer first class across some of its fleet, including the Airbus A380, and maintains a separate lounge for first class passengers at Seoul's Incheon Airport, that cannot be accessed by elite frequent flyers based on status alone.
Neither airline offers premium economy – the closest thing being Asiana's Economy Smartium section on the Airbus A350, but which is simply an economy 'extra legroom' product, provided in a standard economy seat with standard economy service.
Both airlines are also known for flying a wide range of business class seats across different types of aircraft: some having direct aisle access for every passenger, and others not.
Additional reporting by David Flynn