The merger of three low-cost carriers (LCCs) affiliated with Korean Air and Asiana has cleared the government hurdle. The Ministry of Land, Infrastructure and Transport said on the 12th that it had approved the integration of Jin Air, Air Seoul and Air Busan, subject to conditions requiring the establishment of a flight safety system and the implementation of a consumer protection plan.
The combined LCC will launch on March 17 next year. Jin Air will remain as the surviving entity and absorb Air Busan and Air Seoul. Jin Air is a subsidiary of Korean Air, while Air Seoul and Air Busan are subsidiaries of Asiana. Before that, the merged Korean Air-Asiana full-service carrier (FSC) is scheduled to launch on December 17 this year. The combined LCC will operate the most international and domestic flights among South Korean LCCs.
An FSC is an airline that provides comprehensive in-flight services such as meals and baggage. LCCs cut or charge for in-flight services in order to lower fares.
The Fair Trade Commission has also approved the business combination filing for the deal. Because all three companies belong to the Hanjin business group, the deal was presumed under review criteria not to restrict competition.
The ministry conducted its review by applying the licensing criteria of the Aviation Business Act. A merger advisory panel made up of experts in the aviation industry, consumer affairs, employment, law and accounting provided advice. The Korea Transport Institute and an accounting firm also took part in the expert review. No grounds for disqualification emerged, such as de facto foreign control or foreign nationals among registered officers. Requirements on capital, financial capacity and the adequacy of the business plan were also met. The final approval was decided after a licensing advisory meeting.
Conditions were attached. Jin Air must undergo an inspection of changes to its flight safety system and complete approvals from overseas aviation authorities by the launch date of the combined LCC. It must report monthly to the ministry on the implementation of submitted plans, including consumer protection.
Jin Air also presented a plan to develop Busan as a second hub. The core of the plan is to increase international routes at Gimhae Airport from 28 to 33 and weekly flights from 281 to 339. It also includes expanded hiring of specialists such as cabin crew and mechanics, and stronger industry-academia cooperation with local universities. Existing employees will be retained, and there will be no artificial restructuring. Aircraft based in Busan will be increased, and Air Busan's existing infrastructure will be maintained. Gimhae Airport will be developed as an independent maintenance base.
The ministry expects the plan to help revitalize regional airports and said it will continue to check whether it is carried out. It recommended that Korean Air and Jin Air communicate closely with the Busan city government and other local communities, given Air Busan's weight in the region.
Park Jun-sang, head of the ministry's aviation industry division, said, “We will strictly manage and supervise so that no safety problems arise and consumer convenience does not decline as the Korean Air-affiliated full-service carriers and low-cost carriers are each integrated and operated.” He urged Jin Air, which will become the country's largest LCC, to build international competitiveness and improve air travel convenience for the public.
The ministry also plans to look into ways to strengthen the competitiveness of other LCCs as the Korean Air group grows in size, in order to create a competitive environment among airlines.