Korean Air-Asiana Merger to Recoup Integration Costs by 2028...Eyes 23 Trillion Won in Annual Revenue as a Global Top Carrier

Korean Air Holds Shareholder Briefing on June 19

"Annual Synergy from Merger Estimated at 300 Billion Won"

"Integration Costs Could Be Recovered as Early as 2028"

Korean Air has projected that, through its integration with Asiana Airlines, it will generate annual synergy effects worth 300 billion won and expects to fully recover the integration costs by around 2028. Following the integration, the company unveiled its vision to become a global airline with annual revenue of 23 trillion won and a fleet of approximately 230 aircraft.

On June 19, Korean Air held a shareholder briefing at the headquarters of Korea Investment & Securities in Yeouido, Seoul, where it revealed the current progress and future plans regarding the merger with Asiana Airlines.

Woo Ki-hong, Vice Chairman and CEO of Korean Air, is speaking at a shareholder briefing held on the 19th at the Korea Investment & Securities headquarters in Yeouido, Seoul. Photo by Lee Seung-jin

Heedon Park, Executive Vice President of Corporate Strategy, stated, "According to advisory results from accounting firms, the estimated integration costs as of 2024, when the integration decision was made, were calculated at around 900 billion to 1 trillion won." He added, "The synergy is estimated at 300 billion won per year, and we believe that, upon actual integration, we can achieve even higher results than the market expects. If things proceed quickly, we will be able to fully offset the integration costs by as early as 2028."

Korean Air is currently undergoing the merger approval process with the Ministry of Land, Infrastructure and Transport, and, after submitting a securities registration statement to the Financial Supervisory Service and obtaining approval at the Asiana Airlines shareholders' meeting, the integrated Korean Air is scheduled to be launched on December 17.

Korean Air also presented various strategies for maximizing synergy. The company plans to adjust overlapping routes between the two airlines and strengthen the transfer network to increase passenger demand. In particular, it aims to enhance competitiveness on North American routes by incorporating Asiana Airlines routes into the joint venture sales network operated by Korean Air and Delta Air Lines.

The company is also pursuing cost reduction. Its strategy is to optimize key resources such as aircraft and maintenance facilities and to integrate the purchasing organizations to realize economies of scale. Korean Air will also seek to improve aircraft leasing conditions and internalize engine maintenance.

Korean Air expects that, following the integration, it will grow into a global airline with a fleet of around 230 aircraft and annual revenue of 23 trillion won.

However, the company did not provide specific profitability forecasts. Ha Eun-yong, Executive Vice President and Chief Financial Officer (CFO) of Korean Air, said, "Profitability is significantly affected by external factors such as oil prices, exchange rates, wars, and tariffs," and added, "Setting a target for profitability indicators would be inappropriate and could provide misleading information to investors. Therefore, we will disclose indicators related to profits after management normalization is achieved following the merger."

A Korean Air B747-8i charter flight is preparing for takeoff on the morning of the 10th at the apron of Terminal 2, Incheon International Airport. Photo by Airport Photographers Group

Regarding shareholder value protection, which has drawn significant attention from shareholders, Korean Air emphasized that "the ratio of new shares to be allotted is only 5.52%, and the 131,578,947 shares of Asiana Airlines owned by Korean Air are excluded from the new share allotment," stressing that "the shareholder value dilution feared by Korean Air shareholders will be limited."

Previously, the merger ratio between Korean Air and Asiana Airlines was set at 1 to 0.2736432. The company also stated that it would maintain its dividend policy. Korean Air announced that it plans to continue with the current publicly disclosed principle of 'dividends at the level of 30% of net income.'

The integration of loyalty programs was also discussed. The Fair Trade Commission is currently reviewing the third mileage integration plan submitted by Korean Air. This plan reportedly includes expanding bonus seat availability, guaranteeing opportunities for seat upgrades, expanding partner networks, and ensuring long-term use of Asiana Airlines mileage.

After the briefing, Woo Ki-hong, Vice Chairman and CEO of Korean Air, told reporters, "Approval has not yet been granted," and added, "We are working to complete the remaining procedures so that a conclusion can be reached no later than August."

Vice Chairman Woo stated, "Korean Air is on the verge of completing its integration with Asiana Airlines and taking a leap forward as a truly global top carrier." He continued, "This unprecedented integration between national flag carriers in Korean history is more than just the physical merger of two airlines; it will serve as a decisive turning point for restructuring Korea's airline industry and creating a more competitive aviation ecosystem."

This content was produced with the assistance of AI translation services.