Major news is hitting the airwaves this morning as the pandemic continues to reshape the airline industry.
THE DETAILS
This morning, Korean Air, South Korea’s biggest carrier, announced that it intends to acquire Asiana Airlines in a deal valued at 1.8 trillion won ($1.6 billion USD) which would create the world’s 10th-biggest airline by fleet-size.
If you’re not familiar with Korean Air or Asiana Airlines, they are two full-service carriers based in South Korea and both airlines have struggled financially (even before the pandemic).
Compounding the equation in Korea is stiff competition from, both, foreign airlines and low cost carriers.
Korean Air Chairman Cho Won-tae said in a statement:
The company made the decision to help the country’s airline industry continue to grow (amid uncertainties) and minimize the injection of public funds (into Asiana).
AIRLINE FLEETS
Often the first thing that I think about when I hear about acquisitions are current fleets. In other words, what type of aircraft does each airline possess? After combining fleets, where could they maximize their returns?
Recognizing that so many airlines are retiring planes at a rapid pace (specifically A380s, 747s) for more fuel-efficient planes, will there be a mass retirement party?
Well, Asiana has a fleet of 81 aircraft, while Korean Air has a fleet of 172 aircraft. That in and of itself is not a challenge however when looking at the specific types of planes it’s surprisingly more complicated. For example:
- Korean Air has 10 A380s, Asiana has 6 A380s = 16 A380s total. For context, that makes the combined A380 fleet the 3rd largest in the world, so I presume most of those planes will be headed to the desert fairly soon.
- Additionally, the combined long haul fleet (sans the A380) would include the 747-400 & 747-8 (both which have been retired by practically everyone), 772, 773, 789, A332, A333, A359; and this doesn’t take into consideration the 787-10s and A350-1000s on order.
…so again, I predict we’re going to see a much smaller fleet should this acquisition be approved.
FINAL STAMP
Along those lines, it’s worth noting that while plans have been announced, the airlines still have to obtain regulatory approval before it is actually finalized so this is far from complete.
Interestingly, Delta owns a significant stake in Korean Air so if the deal is approved, it will ultimately be good for Delta (and SkyTeam) but not so ideal for Star Alliance given they will lose an alliance partner and a major player on the transpacific routes.
We’ll have to place this in the “still developing” folder for now…
What do you think about this news?
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