Korean Air Lines Co.'s anticipated acquisition of Asiana Airlines Inc. is expected to spur domestic budget carriers to seek mergers, with the two domestic aviation industry leaders' coupling forecast to create the country’s largest low-cost carrier (LCC).
Korean Air, the country’s No. 1 full-service carrier, said on Thursday it secured final approval from the European Commission, the region’s antitrust body, for the merger with Asiana, moving one step closer toward sealing the 1.8-trillion-won ($1.3 billion) deal and becoming one of the world’s 10 biggest airlines.
Once the merger is approved, Korean Air plans to integrate the operations of its LCC subsidiary Jin Air Co. with those of Asiana’s budget carriers, Air Busan Co. and Air Seoul.
The move would create the country’s largest LCC with a fleet of 55 aircraft and 2.5 trillion won ($1.8 billion) in sales as of 2023. The three low-cost airlines combined operated 14.9% of Korea's international flights last year.
“We need to improve those LCCs’ competitiveness and cost efficiency through integrated operations,” said a Korean Air official. “The three carriers will discuss when to launch the combined entity.”
The current leading domestic budget airline is Jeju Air Co. Operating a fleet of 42 aircraft, it reported revenue of 1.7 trillion won and held 10.8% of the country's international passenger flight market share in 2023.
ACQUISITIONS
Jeju Air has already considered potential acquisitions of smaller rivals.
“Airlines owned by PEFs will eventually be subject to sale. If an M&A opportunity arises, we will actively respond,” Jeju Air CEO Kim E-bae said in a July email to company executives and employees, referring to private equity firms.
Among local budget carriers, Air Premia Inc., Eastar Jet Co. and Air Incheon Co. are all owned by PEFs.
Meanwhile, T'way Air Co. is striving to rise to the top of the country’s LCC sector. Korean Air handed over four profitable European routes, including service between the country’s main gateway Incheon and Paris, to T’way as part of the conditions aviation regulators set for its merger with Asiana.
The budget carrier took over five aircraft and about 100 staff including pilots and flight attendants from Korean Air.
Korea’s largest resort operator Sono Hospitality Group has bought stakes in T’way and Air Premia, becoming their second-largest shareholder.
“Sono has been keeping an eye on airlines in order to expand its businesses,” said an LCC industry source.
“Sono is expected to become T’way’s top shareholder at any time by purchasing stocks in the market, as its stake is not much smaller than the current No. 1 shareholder YeaRimDang Publishing Co.,” said the source. “If Sono with its deep pockets takes management control of T’way, that will shake the entire LCC industry.”
Write to Jin-Won Kim at jin1@hankyung.com
Jongwoo Cheon edited this article.
The European Commission (EC), the European Union (EU) antitrust body, approved the merger between Korean Air Lines Co. and Asiana Airlines Inc. on November 28. EC said it had concluded its review after confirming Korean Air’s fulfillment of all required conditions for the merger wit
Air Premia won a business license in 2019 Sono Hospitality Group, South Korea’s largest resort operator, will add low-cost carrier Air Premia Inc. to its bulging portfolio after agreeing to buy a stake in the airline from a domestic private equity firm for 47.2 billion won ($34.6 million)
Jeju Air's B737-800 aircraft Jeju Air Co., a leading South Korean low-cost carrier (LCC), will likely seek the acquisition and merger of a rival small airline operator amid intensifying competition to rise to the top in the domestic budget carrier market.According to industry sources on Friday,
(File photo, courtesy of T'way Air) South Korea’s top resort operator Sono International Co. has bought a stake in T'way Air Co., a local low-cost carrier (LCC), for 105.6 billion won ($76 million) after taking over overseas hotels to expand its global businesses.Sono purchased a 14.9% st
The proposed 1.8 trillion-won ($1.3 billion) merger between Korean Air Lines Co. and Asiana Airlines Inc. will offer a tailwind to South Korea’s low-cost carriers striving to increase long-haul flights and cargo services.T'way Air Co. is poised to take over Korean Air’s four golden
Korean Air and Asiana Airlines' planes grounded at Incheon Int.'l Airport. Korean Air Lines Co. will spend 1.8 trillion won ($1.6 billion) to own a majority stake in beleaguered local rival Asiana Airlines Inc., in a deal that will catapult it to become the world’s seventh-largest airline