Asiana brand to disappear as Korean Air merger nears

(Korean Air)

Korean Air will officially launch as an integrated airline on Dec. 17 after absorbing Asiana Airlines, bringing an end to the Asiana brand after nearly four decades.

The two airlines said Wednesday that their respective boards approved a merger agreement. The companies plan to formally sign the deal Thursday and submit an application for merger approval to South Korea’s Ministry of Land, Infrastructure and Transport.

The merger marks the culmination of a process that began in November 2020, when Korean Air signed a stock purchase agreement to acquire its smaller rival. Asiana’s financial condition deteriorated during the COVID-19 pandemic, prompting the government and creditors to inject 3.6 trillion won ($2.43 billion) in policy funding. Korean Air later repaid the full amount of the public funds.

In December last year, Korean Air completed the acquisition process by obtaining a 63.88 percent stake in Asiana Airlines and making it a subsidiary.

Under the merger terms, the exchange ratio was set at 1 Korean Air share to 0.2736432 Asiana shares based on market price standards under South Korea’s capital market law. Asiana shareholders will receive one newly issued Korean Air share for roughly every 3.65 shares they hold.

Korean Air’s capital is expected to increase by about 101.7 billion won as a result of the merger.

Asiana Airlines plans to hold an extraordinary shareholders meeting in August to approve the merger. Korean Air will instead finalize the process through a board resolution because the deal qualifies as a small-scale merger under local regulations, meaning the number of newly issued shares remains below 10 percent of existing shares.

Shareholders opposing the merger may exercise appraisal rights. Investors can submit objections between May 28 and June 11 and later request the company to purchase their shares at a predetermined price after the August shareholders meeting. Shareholders who take no action will automatically receive Korean Air shares based on the agreed conversion ratio.

Following the merger agreement, Korean Air plans to apply in June for regulatory approval to revise its Operations Specifications, or OpSpecs, needed to integrate the two airlines’ safety operation systems. The company will maintain Korean Air’s existing Air Operator Certificate while incorporating Asiana aircraft and safety procedures into its operating framework.

Ahead of the launch, Korean Air has been remodeling facilities including its operations control center, cabin crew training center and aviation medical center at its headquarters in Seoul’s Gangseo District. The airline has also standardized pilot training programs and worked on overlapping route adjustments, new route development, lounge renovations and in-flight meal upgrades.

However, a highly anticipated integration plan for the two airlines’ mileage programs has yet to be finalized. Korean Air said it is still in discussions with the Korea Fair Trade Commission and will provide details once an agreement is reached.

Founded in 1988, the Asiana Airlines brand will officially disappear on Dec. 17 after 38 years of operation.

An airline industry official said that while the timeline for physical integration has been established, achieving a true organizational merger will take longer, pointing to ongoing tensions over pilot seniority and internal rivalry between employees of the two carriers.