Shares of Korean Air and Asiana Airlines rose following news that the two airlines have initiated their merger process.
As of 2:26 PM on May 14, Asiana Airlines was trading at 7,730 won, up 14.86% (1,000 won) from the previous trading day. Hanjin KAL rose 4.28% to 117,000 won, while Korean Air increased by 3.30% to 26,600 won.
On May 13, both Korean Air and Asiana Airlines held regular board meetings and approved the merger agreement. The two companies have set December 17 as the launch date for the merged Korean Air. The merger ratio has been determined at 1 to 0.2736432, which is expected to increase Korean Air's capital by approximately 101.7 billion won.
The signing of the merger agreement comes five years and six months after the new stock subscription agreement between Korean Air and Asiana Airlines on November 17, 2020. Following approval from Asiana Airlines' shareholders, the merger is scheduled for December 16, with new shares expected to be listed on January 4, 2027.
Jeong Yeon-seung, a researcher at NH Investment & Securities, stated, "Post-merger, the integration of overlapping infrastructures such as aircraft maintenance, ground operations, in-flight meals, and overseas sales networks will be possible. This is expected to lead to significant fixed cost reductions and economies of scale."
He added, "Expectations for synergies will gradually increase starting in the fourth quarter, when some operational effects of the merger will be reflected. The merged entity will establish itself as the dominant number one player in the South Korean aviation market."
However, Jeong noted that the number of new shares issued during the acquisition of Asiana Airlines by Korean Air will only account for 5.5% of the total shares, which is not expected to significantly dilute shareholder value.
* This article has been translated by AI.
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