Korean Air has drawn attention to the integrated operation plan as it has embraced Asiana Airlines as a subsidiary for the first time in 4 years and 1 month. Significant challenges are expected during the consolidation process, while Korean Air's maintenance, repair, and overhaul (MRO) business and ground operations are expected to enjoy the benefits of the merger due to the increased workload. Over the next two years, Korean Air plans to undergo a consolidation process that will include restructuring personnel and route structures, merging overseas branches, and consolidating mileage programs.
On Dec. 12, Korean Air ascended to the position of the largest shareholder of Asiana Airlines. Korean Air, which announced the merger with Asiana Airlines in November 2020, invested a total of 1.5 trillion won to acquire a 63.9% equity stake in Asiana Airlines. At an extraordinary shareholders' meeting scheduled for Jan. 16, it plans to carry out personnel changes, including a new CEO and other key executives. Song Bo-young, the head of Korean Air's passenger business division, is a strong candidate for the new CEO of Asiana Airlines.
Korean Air's MRO business is expected to benefit from an increase in workload due to this merger. Asiana Airlines only conducts light and medium maintenance in its own hangar, outsourcing tasks such as aircraft engine maintenance to overseas manufacturers. If Korean Air takes on this volume for in-house maintenance, the performance of its maintenance division could improve. The maintenance cost for a mid-range aircraft is reported to be several hundred million won.
Korean Air is making efforts to expand its MRO business. It aims to secure rights for overseas aircraft engine maintenance and is constructing a new engine maintenance factory in the Unbuk district of Yeongjong-do, Incheon, with an investment of 578 billion won, targeting completion in 2027. Currently, some maintenance work for Air Premia and T'way Air is also being handled by Korean Air. Once the new factory opens, it expects to secure more maintenance contracts from other airlines, including Asiana Airlines.
The ground handling business is also expected to grow. Korean Air has Korean Airports (with a domestic market share of 49.7%) as a subsidiary, while Asiana Airlines has Asiana Airport (19.3%) for ground handling operations. Ground handling refers to all the tasks performed before and after flights for smooth operation, including loading and unloading baggage, cargo handling, aircraft fueling, and maintenance. If the two entities merge, the market share could instantly soar to 70%.
Typically, the revenue of the ground handling business is directly linked to the volume generated by affiliates, so an increase in flight services due to the merger will also improve performance. A company official noted, 'While the scale of Korean Airports' ground handling could increase with the merger, the domestic market size is limited. National airlines have established their own systems; thus, monopoly has little significance in our country.'
The consolidation of overseas branches of both airlines is also expected to create synergies. Due to differing operational systems, it appears they will operate cooperatively for the time being. Since the pandemic, the number of overseas branches of airlines has significantly decreased, and many locations are temporarily operated, still functioning flexibly. Korean Air has over 120 overseas passenger and cargo branches, while Asiana Airlines has around 60 overseas passenger branches that are subject to consolidation. Asiana Airlines' cargo branches (16) are expected to be transferred to Air Incheon.
Korean Air said, 'A specific integration plan has not yet been determined.'