Korea Railroad Corporation (KORAIL) and SR Corporation are set to complete their merger on September 1, transitioning to a three-year interim operational phase. Approximately 700 SR employees will be integrated into a new division under the direct supervision of the KORAIL president, during which the two companies will work to unify their wage, rank, and welfare systems.
While the high-speed rail operations will be consolidated under KORAIL starting in September, a full organizational integration is expected to take considerable time. The planned 10% reduction in KTX fares coincides with the transfer of SR's assets and liabilities, presenting challenges related to financial burdens and concerns over potential service declines following the end of the competitive framework.
According to the Ministry of Land, Infrastructure and Transport and the rail industry, KORAIL and SR signed a business transfer agreement on July 30 and received approval from the Fair Trade Commission for the merger. KORAIL will take over SR's high-speed rail operations and acquire the 58.95% stake in SR held by the Ministry.
The government plans to transfer SR's operations, organization, personnel, assets, and liabilities to KORAIL on September 1, following changes to the rail safety management system and approval of the business transfer. This will mark the end of the dual high-speed rail operation system that has been in place since the launch of SRT in December 2016. The SR corporation is expected to dissolve after settling its debts and undergoing liquidation.
The approximately 700 SR employees will continue their work in the newly established integration management division at KORAIL. This division will serve as a buffer to connect the personnel systems of both companies, gradually adjusting wages, ranks, promotions, welfare, and retirement benefits.
Kim Tae-byeong, director of the Rail Bureau at the Ministry, stated, "We plan to establish the integration management division within KORAIL to manage the organization and personnel over the next three years. We are working towards ensuring that all practical employees from KORAIL and SR are recognized for continued employment."
Post-merger, KORAIL's financial burden will be a key issue. A 10% fare reduction will decrease revenue per passenger, and KORAIL will also inherit SR's debts and contractual obligations.
KORAIL's consolidated revenue last year was 7.317 trillion won, a 6.6% increase from the previous year, but it reported an operating loss of 352.4 billion won. Its debt reached 16.3458 trillion won, with a debt ratio of 280.2%.
The government believes that reducing redundant operations, improving vehicle efficiency, and expanding seat availability will offset the burden of fare reductions. Analysis in the National Assembly indicated that the separate operations of the two companies resulted in an annual redundancy cost of 40.6 billion won. However, the comprehensive financial projections for the integration, considering full employment retention and adjustments to wage and welfare systems, have not yet been disclosed.
Concerns about potential service declines following the end of the competitive framework also need to be addressed. The Fair Trade Commission has determined that the fare structure, frequency of service, and terms of service are subject to approval and reporting by the Ministry, suggesting a low risk of competition restrictions. The government plans to review fares, seat availability, and service plans over the next three years, but specific management criteria have not been provided.
An industry insider remarked, "Achieving a chemical integration that effectively adjusts wage and rank systems and reduces redundant costs is a more challenging task than physical integration. A concrete plan is needed to manage financial burdens while maintaining fare reductions and service improvements."
* This article has been translated by AI.
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