Korean Air to generate more synergy after Asiana takeover

By Lee Min-hyung

Korean Air will be able to create more tangible synergy after completing its long-awaited takeover of Asiana Airlines, market watchers said Sunday.

Last week, the flag carrier finished its transaction to acquire Asiana by paying the remaining cost for the high-profile acquisition.

This is a symbolic milestone that the airline has achieved in almost four years after it announced the plan on November 2020.

The integration of the two airlines will elevate Korea’s position in the global aviation industry, as their combined passenger transportation distance would rank among the global top 10, according to Korean Air.

Industry officials said the synergy from the acquisition will materialize rapidly particularly because of Korean Air’s world-class operational expertise, which will be a significant asset for Asiana.

“This merger is not about one airline disappearing, which would reduce the market and competition,” an official from the aviation industry said.

“It is an opportunity to lay the foundation for healthy growth in the industry, with the potential for both airlines to rise together. With the merger, long-haul route competitiveness will be enhanced, and large-scale synergy will arise through network efficiency."

For instance, both airlines’ financial soundness will improve gradually after their combination. Korean Air has proven its resilience since the COVID-19 pandemic, breaking its own earnings records each year. Its financial structure remains solid with its cash reserves exceeding 6 trillion won ($4.17 billion).

In constract, Asiana Airlines’ debt ratio is close to 3,000 percent, but the figure will drop to around 600 percent after the deal due to a capital increase. This will help the airline save more than 100 billion won each year. After their full integration in two years, Korean Air’s financial structure is also widely expected to improve more.

“The aviation industry is a global competition, so post-merger integration is crucial,” said Lee Yoon-chul, professor of business administration at Korea Aerospace University. “The merged airline must quickly present its vision and global strategy, while reshaping related industries.”

The global aviation industry also reacted favorably to the deal. Delta Air Lines CEO Ed Bastian described it as a “jackpot” and expressed optimism that the deal will be beneficial for not just the airlines, but also Delta.

Over the next two years, Korean Air will embark on comprehensive integration processes over the next two years. They include the integration of Asiana Airlines’ safety management systems, IT infrastructure, organizational structures and accounting practices. Once the process is fully completed, the integrated entity will become a mega-sized global full-service carrier with a fleet of more than 230 aircraft.