Korean Air will assume Asiana’s assets, liabilities, employees, and operations as the combined carrier prepares for launch
Korean Air and Asiana Airlines will make a new start as the “combined Korean Air” on Dec. 17 this year.
Korean Air and Asiana Airlines will make a new start as the “combined Korean Air” on Dec. 17 this year.
Korean Air and Asiana Airlines each held their regular board of directors meetings on May 13 and approved the agenda to execute a merger agreement between the two companies. The two airlines plan to sign the merger agreement on May 14 and officially formalize the schedule for launching the integrated airline.
The execution of this merger agreement comes approximately 5 years and 6 months after Korean Air and Asiana Airlines signed a new share subscription agreement on Nov. 17 of 2020.
Prior to this, as the COVID-19 pandemic caused a sharp decline in global passenger demand, Asiana Airlines’ financial structure and competitiveness were significantly weakened. In response, the government and creditors provided a total of 3.6 trillion won (approximately $2.44 billion) in policy funds to stabilize the domestic aviation industry.
Korean Air continued to provide support to improve Asiana Airlines’ financial structure and normalize its management throughout the acquisition and merger process. All public funds extended during this process have been fully repaid. Korean Air plans to complete the restructuring of the domestic aviation industry and, with the launch of the integrated airline as an opportunity, enhance its competitiveness in the global aviation market while building a foundation for sustainable growth.
Under this merger, Korean Air will assume all of Asiana Airlines’ assets, liabilities, rights and obligations, and employees.
The merger ratio was set at 0.2736432 Asiana Airlines shares per 1 Korean Air share, based on the reference market price under the Financial Investment Services and Capital Markets Act. As a result, Korean Air’s capital is expected to increase by approximately 101.7 billion won. The reference market price is calculated by adding the weighted arithmetic average closing price over the most recent one month, the weighted arithmetic average closing price over the most recent one week, and the closing price on the day before the board meeting, and then dividing by 3.
Following the execution of the merger agreement, Korean Air will also begin in earnest the procedures necessary for operating the integrated airline. To stably integrate the aviation safety operation system, the company plans to proceed with related procedures, including obtaining approval for changes to Operations Specifications (OpSpecs). This is a legal and administrative procedure to incorporate the aircraft and overall safety operation systems held by Asiana Airlines into Korean Air’s operational framework, while maintaining the existing Air Operator Certificate (AOC) of Korean Air, the surviving entity after the merger.
Korean Air will apply to the Ministry of Land, Infrastructure and Transport for merger approval immediately after signing the merger agreement on May 14. In June, it also plans to apply for approval to amend the Operations Specifications to reflect the changed aviation safety compliance conditions and restrictions following the integration. Once domestic licensing and approval procedures are completed, the necessary procedures, including changes to Operations Specifications, will be carried out sequentially with overseas aviation authorities.
Asiana Airlines plans to hold an extraordinary general meeting of shareholders around August to vote on the merger agenda. As this merger meets the requirements for a small-scale merger, Korean Air plans to substitute the shareholders’ meeting with a board resolution on the day Asiana Airlines holds its shareholders’ meeting.
As this merger is a matter of great interest to shareholders, Korean Air has also implemented the fairness-strengthening measures set out in the “Guidelines on Directors’ Conduct Standards during Corporate Reorganization,” recently announced by the Ministry of Justice, in order to protect shareholders’ rights and interests and to comply with the duty of loyalty to shareholders under the amended Commercial Act.
Korean Air explained that its ESG Committee served as a special committee and separately deliberated on the fairness of the merger transaction terms and conditions. In addition, independent external experts reviewed the appropriateness of the merger price and merger ratio and the fairness of the calculation method, and also assessed the appropriateness of the overall procedures and the framework for protecting shareholders’ interests. In order to provide shareholders with sufficient relevant information, the securities registration statement will contain detailed accounts of the implementation and results of the fairness-strengthening measures.
Korean Air continues to invest in safe flight operations and improved customer service ahead of the launch of the integrated airline. To build the foundation to compete with global mega-carriers, the company has been working to broaden customers’ choices by reassigning overlapping routes and developing new routes. It is also raising the quality of service that customers can directly experience through airport lounge renewals, in-flight meal revamps, and airport terminal relocations.
The plan to integrate the mileage programs of both airlines is currently under discussion with relevant authorities, including the Korea Fair Trade Commission. Korean Air plans to notify customers as soon as the integrated plan is finalized.
Preparations and investments for safe flight operations are also being carried out in parallel. In anticipation of the expanded fleet, routes, and workforce following the integration, the Operations Control Center (OCC) at the headquarters in Gangseo-gu, Seoul, the Cabin Training Center, and the Aviation Medical Center have been remodeled and operational systems have been streamlined. The flight crew training programs of both airlines have also been standardized to minimize operational disruption and to provide stable aviation services immediately after the launch of the integrated airline.
Facility investments to strengthen maintenance capabilities are also underway. Korean Air is expanding or newly building large-scale aircraft maintenance facilities, including an Engine Test Cell (ETC), a new engine maintenance plant, and a maintenance hangar near Incheon International Airport.
Choi Mun-hee
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