It has been noted that the integration of Korean Air and Asiana Airlines will reduce excessive price competition and enhance operational efficiency through economies of scale.
삼일PwC announced on the 18th that it has published a report titled "Impact of the Integration of Korean Air and Asiana Airlines on the Aviation Industry." The report aims to examine the changes and impacts on the domestic air transport industry stemming from the merger of the two major national carriers and to propose measures for advancement.
According to the report, this merger will lead to the large-scale consolidation of airlines, and in the passenger sector, it is expected to enhance supply capacity, signifying an expansion in the number of routes and services provided. Furthermore, with the integration of low-cost carriers (LCCs) such as Jin Air, Air Seoul, and Air Busan under the two companies, it is anticipated that the merged company will rise to the top of the LCC market with a 41% market share, thus benefiting from economies of scale.
The report indicated that as LCCs expand their long-distance routes and new entrants become active, the demand for airline mergers and acquisitions may increase to expand market share.
Additionally, the report analyzes that the large-scale consolidation of the aviation industry resulting from the merger is expected to lead to: ▲ a reduction in unnecessary seat price competition among airlines ▲ improved profitability due to economies of scale ▲ decreased sensitivity to external variables ▲ improved financial structure.
It particularly emphasized that achieving economies of scale requires strategic choices ranging from cooperation among airlines to consolidation and mergers. Regarding this, the report suggested that "in the case of full-service carriers (FSCs), it is necessary to expand global routes or enhance route density through integrated LCCs, while in the passenger sector, differentiation and sophistication of services such as seat classes are needed," and that "LCCs can choose a strategy to increase passenger capacity (CAPA) through interline agreements and partnerships with major domestic LCCs following their entry into long-distance routes."
Furthermore, the report stressed that proactive measures are necessary due to the intensifying regulations on carbon emissions in air transport, particularly emphasized by the European Union (EU). It pointed out that mandatory usage regulations for sustainable aviation fuel (SAF) are expected to be implemented in earnest starting in 2027 in Korea, and thus preparations in this regard are necessary. It also added that digital transformation and the enhancement of operational environments are required to improve customer convenience and operational efficiency, and that investment in these areas should be increased.
The report contended that since the domestic aviation industry is significantly affected by economic conditions and external variables, and that increasing expenses are expected due to the strengthening of carbon emission regulations, active government support such as financial and tax incentives is needed for the aviation industry.
Won Chi-hyung, leader (partner) of transportation logistics industry at 삼일PwC, remarked, "While the increasing macro uncertainty next year is a burden, mergers and acquisitions (M&A) in the aviation industry have generally brought positive effects to the respective corporations and industries," and added that "this integration will serve as an opportunity for the domestic aviation industry to make a leap forward, requiring effective government support for a smooth integration process and strengthening the competitiveness of the domestic aviation sector."