Refer Report
A Korean Air-Asiana Airlines passenger plane is visible on the Incheon International Airport runway and parking lot on the 29th. Yonhap News
As the merger of Korean Air and Asiana Airlines has passed the final hurdle of approval by the European Commission (EC), consumers’ attention is focused on ‘mileage integration’.
Korean Air plans to integrate Asiana mileage into Korean Air Skypass when the integrated airline is launched in two years, but there is considerable concern that one of the consumers of both companies will be dissatisfied depending on the integration ratio. Integration of the low-cost carriers (LCCs), which are subsidiaries of both companies, is also a remaining task.
Asiana mileage will remain the same for 2 years… The integrated plan will be outlined in the first half of next year.
According to the aviation industry on the 29th, Korean Air plans to operate the existing Asiana Club mileage program independently for two years while having Asiana Airlines as a subsidiary, and then integrate it into Korean Air Skypass when the integrated airline is launched. Korean Air plans to acquire a 63.9% stake in Asiana Airlines next month and operate it as a subsidiary for two years, going through the organization and brand integration process in the form of ‘two families under one roof’.
During this period, consumers can use Asiana Airlines mileage to purchase airline tickets for Asiana Airlines or its Star Alliance member airlines as before. When ‘Integrated Korean Air’ is launched two years later as planned, Asiana Airlines mileage will be converted to Skypass mileage that can be used to purchase Korean Air tickets.
The issue going forward is the ‘conversion ratio’ of mileage between both companies. In general, Asiana Airlines mileage is evaluated to have a lower market value than Korean Air. When accumulating mileage through an affiliated credit card company, Korean Air accumulates 1 mile for every 1,500 won spent, while Asiana Airlines accumulates 1 mile for every 1,000 won spent.
If Asiana Airlines mileage is combined with Korean Air mileage on a 1:1 basis, existing Korean Air customers may be dissatisfied. However, if the Asiana Airlines mileage conversion rate is lowered, there may be protests from Asiana Airlines customers.
A Korean Air official said, “We are especially aware that setting a fair and reasonable conversion rate between mileage from both companies is important for customers.” “We also plan to conduct sufficient consultations,” he said. Since Korean Air must submit a mileage integration plan to the Fair Trade Commission within six months once the business combination is confirmed, the outline of the integration plan is expected to be revealed in the first half of next year.
In order to minimize issues, Korean Air is expected to encourage the use of Asiana Airlines mileage as much as possible before the merger. As of the third quarter of last year, Asiana Airlines’ unused mileage was worth 981.9 billion won. Asiana Airlines’ special mileage flight to Jeju starting from the 27th and holding a mileage product promotion can be interpreted in the same context.
Jin Air-Air Busan-Air Seoul are also integrated… ‘Mega LCC’ appears
Discussions on integrating the low-cost carriers (LCCs), which are subsidiaries of the two companies, are also expected to begin in earnest. The aviation industry predicts that Jin Air, a subsidiary of Korean Air, will launch an integrated LCC by absorbing Air Busan and Air Seoul, subsidiaries of Asiana Airlines.
Hanjin Group Chairman Cho Won-tae said in a foreign press interview in 2022, “The integrated LCC will operate under the Jin Air brand and its hub will be Incheon International Airport.”
However, in a situation where the Yoon Seok-yeol government is emphasizing balanced regional development, the fact that there is strong local opposition to the integration of Air Busan, which uses Gimhae Airport as its hub airport, into Jin Air is a variable. The Busan community continues to argue that Korean Air should separate and sell Air Busan.
If Jin Air, Air Busan, and Air Seoul launch an integrated LCC, a tectonic shift in the LCC industry is inevitable. Currently, there are 9 domestic LCCs, including Jeju Air, Jin Air, T’way Air, Air Busan, Air Seoul, Eastar Jet, Air Premia, Aero K, and Fly Gangwon. Jeju Air maintained the undisputed first place in terms of sales, number of aircraft owned, and number of passengers, while Jin Air and T’way Air were competing for second and third place.
However, once the integrated LCC is launched, it will immediately surpass Jeju Air in all aspects. Last year, the combined sales of Jin Air, Air Busan, and Air Seoul amounted to 2.4785 trillion won, which is more than Jeju Air (1.724 trillion won), and the number of aircraft they own is 58, which is more than Jeju Air, which has 41 aircraft. Accordingly, there is speculation that Jeju Air may pursue an airline merger or acquisition in the future.
There is also a rumor going around that Daemyung Sono Group, a hotel and resort company that has recently secured the second largest shareholder position in T’way Air and Air Premia, is planning to acquire and merge both companies. If this happens, the domestic LCC market will be reorganized into a ‘three-power system’. It appears that
Source: Korean