Korean Air buys majority stake in rival Asiana Airlines

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Korean Air said it paid $1 billion for the stake in rival Asiana. Photo: PASCAL PAVANI / AFPSource: AFP

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South Korea's flag carrier Korean Air said Thursday it had bought a majority stake in rival Asiana Airlines for $1 billion, making it the effective owner four years after first expressing its takeover intentions.

With the acquisition of a 63.88 percent stake, Korean Air said it had invested 1.5 trillion won in the merger, "making Asiana Airlines a subsidiary" of the company.

The move will create Asia's second-biggest airline group based on capacity, after Singapore Air, and the 10th-largest globally, according to Bloomberg News.

The final phase of the tie-up follows the European Union's approval in February, granted on the condition that the flag carrier divests Asiana's global cargo freighter business as part of antitrust measures.

The European Commission, the bloc's powerful antitrust authority, last year expressed concerns the takeover could restrict competition on routes between Europe and South Korea.

It had concerns about the impact on cargo transport services between all of Europe and South Korea.

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The approval was also contingent on Korean Air making "necessary assets" available to South Korean rival T'way Air to launch operations on four overlapping routes: Barcelona, Frankfurt, Paris, and Rome.

With Asiana Airlines as its subsidiary, Korean Air will "strengthen the national aviation industry's competitiveness, enhance Incheon Airport's hub capabilities, and expand its global network reach", the airline said in a press release.

It described the merger as a "strategic milestone for Korea's aviation industry".

Asiana Airlines will convene a shareholders meeting in January to pick a new board of directors appointed by the parent Korean Air, it said.

It added that there would be no workforce restructuring during the integration, with employees in overlapping roles "reassigned within the organisation".

Korean Air currently operates a fleet of 158 aircraft with more than 20,000 employees, serving 115 cities in 40 countries.

Ahead of the merger's approval, Korean Air said in March it would sign a $13.7 billion deal with Airbus to purchase 33 A350 series aircraft to strengthen its long-term fleet operations.