“Brand Integration After 3 Years” … Korean Air Announces Roadmap to Acquire Asiana

▲ Woo Ki-hong, President of Korean Air, at an online conference on the second ⓒ Korean Air

Korean Air Chairman Ki-hong Woo announced the roadmap for the acquisition of Asiana Airlines.

First, Chairman Woo emphasized, “We will continue with the acquisition procedure, such as the paid-in capital increase, the general meeting of shareholders and the change of the articles of incorporation.”

The time to complete the transaction was suggested in the second half of next year.

Regarding the integration of the brand that has attracted attention, he said: “I will use one in three years.”

It is anticipated that the aviation industry will use the integrated brand of ‘Korean Air’ from 2023.

The conference held on the 2nd took place for about 30 minutes in the form of online questions and answers. As it was a hot topic, it was broadcast live and the number of concurrent users exceeded the hundreds.

When the question about the brand continued, Mr. Woo said, “I think (the two companies) should go to an existing brand.” “It is not appropriate in terms of time and cost to use a third brand new and brands that are not used (Korean Air, Asiana) The utilization plan will be revised over time.”

Immediately after the acquisition, Korean Air operates Asiana as a subsidiary. After that, full integration is expected and the related work is expected to take around 3 years.

President Ki-Hong Woo said: “An integrated plan should be drawn up by March 17, and we plan to analyze the general situation in Asiana, not a specific part,” he said. “Comparison of the cost system with Korean Air and the current state, including external contractual relationships such as aircraft. I will investigate.”

Korean Air expects the due diligence period to be 3 months. Considering the schedule for the presentation of the integrated plan specified in the contract with the Korean Development Bank.

The formation of the Asiana Acquisition Committee is complete. The committee includes experts in various fields, such as finance, materials, and legal matters. Law firms and accounting firms will also participate, and the committee will conduct due diligence on Asiana Group and its affiliates.

The business combination report was proposed on January 14 of next year. Ship to all countries subject to overseas reporting, including Korea. A dedicated law firm has been selected at home and abroad, and a dedicated team has been established within Korean Air.

▲ Korean Air-Asiana company overview ⓒ Kim Soo-jeong, photojournalist

Regarding monopoly concerns, Woo explained, “We hope there are no big issues.”

Chairman Woo said: “The share of Korean Air and Asiana slots (according to Incheon Airport) in the domestic market is about 40%, including cargo. If local airports are included, the share of both companies it will decrease even further and from affiliates such as Jin Air, Air Busan and Air Seoul. As the LCC works separately, it does not add up. “

He added: “There are not many overseas routes that have a high market share like in Korea, so there will be no big problems,” he added.

The explanation of the restructuring was followed, which is the most worrying. Chairman Woo once again emphasized the position that there is no artificial restructuring. He also expressed his position to actively cooperate with the Korean Air and Asiana unions for related discussions.

He also explained the KDB funding procedure. On this day, Sangeun raised 500 billion won for Hanjin Kal, a holding company of Hanjin Group, by acquiring new shares. On the 3rd of the next day, he plans to purchase a convertible bond worth 300 billion won.

Hanjin Kal will reinvest 730 billion won in Korean Air legacies. Korean Air is preparing a legacy worth 2.5 trillion won. For this, it is necessary to raise the share issue limit, and on the 6th of next month the general shareholders’ meeting will be held to modify the corporate deed. Korean Air obtains the remaining funds from the market excluding Hanjin Kal’s share.

Chairman Woo said, “Currently, the interest rate and share of securities companies related to Korean Air’s legacy is very high. As the market and shareholders are showing good responses, we expect positive results.”

He also emphasized the synergy of the integrated airline. The market estimates that the integrated airline will generate synergies in areas such as interest expenses such as leasing, insurance premiums and MRO (airline maintenance). As for the amount, an annual profit increase and cost savings of 300 billion won are expected.

Chairman Woo said, “As the person who runs an airline, I believe that if I do more, I will create a synergy of more than 300 billion won.” “With a flexible schedule, it is possible to attract the demand for passenger and cargo transfer, and the sales capacity in foreign markets will be strengthened. I was sure.

He also emphasized the reduction of interest expenses by improving the credit rating. Korean Air pays an annual financial interest of between 400 and 500 billion won. Asiana is paying around 300 billion won. Chairman Woo explained that the credit quality of the two companies will be better than they are today, reducing the interest burden.

It also mentioned plans to operate low-cost integrated airlines (LCC) such as Jin Air, Air Busan and Air Seoul. Without relocating the central airport, Jin Air and Air Seoul plan to develop the current Incheon Airport and Air Busan as bases. He explained that the relocation of the integrated LCC headquarters would be discussed with each party over time.

He also mentioned the possibility of a legal response from tripartite associations such as KCGI. This is an explanation that considers the main demand for the court’s decision to dismiss the injunction.

Chairman Woo said, “(If there is a lawsuit on the issue of the temporary arrangement), Hanjin Kal will respond and Korean Air will focus on the acquisition process.” I will do it.”