The parent company of Korean Air has agreed to buy rival South Korean carrier Asiana Airlines in a deal valued at KRW 1.8 trillion (£1.2 billion). The move is designed to stabilise the aviation market in the country amid the Covid-19 crisis.
The deal will see Korean Air raise KRW 2.5 trillion (£1.7billion) worth of capital by issuing new shares early next year and includes a KRW 800 billion (£0.5 billion) investment from Korea Development Bank.
“Given the crisis the airline industry is currently facing, it is unavoidable to restructure the entire market, including Korean Air, Asiana Airlines, the low-cost carriers such as Jin Air, and relevant industries,” Hanjin KAL said.
The company added, “The main reason behind Korean Air’s decision to acquire Asiana Airlines at this time is to stabilise 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 minimise the injection of public funds.”
The company says the combined airlines are likely to be ranked among the top ten carriers in the world.
Its statement continues: “In general, countries with a population less than 100 million have a single full-service carrier. However, 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. However, 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.”
SkyTeam member Korean Air, established in 1969, carried more than 27 million passengers in 2019 and operates more than 460 flights per day to 123 cities in 43 countries.
Asiana Airlines, a member of Star Alliance, was founded in 1988 and flies to 64 cities in 21 countries as well as 10 cities domestically. Both carriers have their international hubs at South Korea's Incheon International airport.