The integration of Korean Air (KE, Seoul Incheon) and Asiana Airlines (OZ, Seoul Incheon) will cost about KRW600 billion won (USD522 million) more than previously thought, local media reported on July 11.
The flag carrier’s parent, Hanjin KAL Corporation, agreed to buy Asiana in November for KRW1.8 trillion (USD1.57 billion) through the acquisition of new shares and perpetual convertible bonds.
But according to data obtained by Park Sang-hyuk, a member of the National Assembly for the ruling centrist Democratic Party, Hanjin will have to pay a total bill of around KRW2.4 trillion (USD2.09 billion) for the acquisition and post-merger integration, a process that will take more than two years.
Merging the two full-service airlines’ information technology systems will absorb most of the integration budget, Park claimed, including combining their booking and ticketing systems, customer databases, crew training systems, and loyalty schemes. However, the costs of integrating two loyalty programmes can be avoided if Korean Air runs a set of promotions aimed at using up Asiana’s air miles.
Korean Air has already paid KRW1 trillion (USD870 million) of its acquisition budget to Asiana Airlines, including a KRW300 billion (USD261 million) down payment and KRW400 billion (USD348 million) in further payments to its former rival, and it plans to pay another KRW800 billion through the planned capital increase. As previously reported, Korean Air had already raised KRW3.3 trillion (USD2.87 billion) in a paid-in capital increase in March 2021.
However, Korean Air CEO Woo Kee-hong has claimed the integration of Korean Air and Asiana Airlines will create synergies worth between KRW300 and KRW400 billion (USD261-348 million) per year once the aviation industry fully recovers from the coronavirus pandemic.
