The Korea Herald


What lies in future for Korean Air?

‘Smooth’ process to acquire Asiana so far, but slow COVID-19 vaccine rollout to pose challenge

By Yim Hyun-su

Published : March 24, 2021 - 17:49

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A Korean Air plane carrying Pfizer vaccines arrives at Incheon Airport on Feb. 26. (Yonhap) A Korean Air plane carrying Pfizer vaccines arrives at Incheon Airport on Feb. 26. (Yonhap)
Battered by the unprecedented COVID-19 pandemic and the consequent traveling limits, South Korea’s national flag carrier Korean Air hit the rockiest patch of its half-century history last year.

While there seems to be hope on the horizon on the back of the acquisition of longtime rival Asiana Airlines, the air carrier is still looking at another challenging year -- this time due to the uncertainty of the post-coronavirus recovery and slow vaccine distribution.

In the latest developments surrounding the merger of Korean Air and Asiana Airlines, state-run lender Korea Development Bank last week launched a management evaluation committee dedicated to the deal.

The committee will oversee Korean Air’s post-merger integration and evaluate its business operation to bring about the “sound management of the airline” with plans to set objectives for the evaluation process sometime in the first half of this year, KDB said in a statement.

The move came after the airline raised 3.3 trillion won ($2.92 billion) through paid-in capital increase, of which some 1.5 trillion won will be spent to purchase Asiana stocks later this year.

With a total of 173.6 million shares sold at 19,100 won each, lower than its closing price Wednesday of 26,750 won, as well as hopes surrounding the acquisition deal, the airline successfully raised capital, clearing yet another hurdle in its plan to acquire Asiana.

“The big issue now is whether the Fair Trade Commission’s corporation consolidation process will go smoothly or not, which we expect to find out sometime during the first half of this year,” said Hurr Hee-young, a professor at Korea Aerospace University.

“Their efforts to do away with nonprofitable assets and the sale of their property in Songhyeon-dong all seem to be going as planned, not to mention that its cargo business is also doing well like last year.”

Though challenges remain, such as the job security of Asiana staff, the acquisition process in general is proceeding without setbacks, the expert noted.

Analyst Kim Yu-yuk of Hanwha Investment & Securities also echoed a similar sentiment in a recent report.

“The competitors have suffered heavy operating losses without benefiting from the cargo boom and are most likely to downsize in 2021 and 2022. But Korean Air can manage to minimize the scale of downsizing and is capable of supplying flights for where passenger transport demand is recovering and expanding its market share,” Kim said.

As Hurr pointed out, however, the possibility of a job cut remains as a source of concern for the acquisition.

In December, Woo Kee-hong, the airline’s president, said most staff at both airlines would stay after the takeover as Korean Air had “no plans to reduce supply.”

Woo’s remark came amid concerns over the treatment of Asiana staff after the acquisition. Some 28,000 staff members work at South Korea’s two national flag carriers, with 90 percent to 95 percent directly employed, according to the airline’s president.

According to the 2020 business report released Friday, Korean Air staff saw their salaries fall 19 percent from the previous year, down from 80.82 million won to 68.16 million won.

Outside the takeover process, Korean Air has agreed to work with the International Air Transport Association in adopting its Travel Pass. The plan will see the airline trial the mobile application as proof of vaccination for passengers during its Incheon to Los Angeles flight in May.

Dubbed “Test & Fly,” the idea is for passengers with the Travel Pass to take an antigen test for COVID-19 and receive the result within an hour, while going through the check-in process.

In February, the airline also teamed up with web portal giant Naver to adopt some of the company’s technologies such as artificial intelligence, its cloud platform and payment system in its service.

Despite the arrival of IATA’s Travel Pass and the vaccine rollout, however, Hurr is less optimistic on the recovery of the country’s aviation sector in general. While countries with a sizable domestic market such as the US will see the industry boosted by growing vaccination rates, South Korea, which has gotten off to a relatively slow start, might have to wait longer.

“Unlike countries like China, the US or Japan, South Korea’s domestic aviation market accounts for less than 10 percent of major airlines’ revenue, and international travel must be resumed to keep the industry afloat in Korea’s case,” the professor said.

“No matter how well you have handled the pandemic, you need others to open borders for international flights to fly. As far as travel bubbles are concerned, Korea’s aviation industry might continue to struggle longer while other countries are recovering, given the situation.”

By Yim Hyun-su (