South Korea's largest flag-carrier Korean Air last week announced it would acquire its smaller local rival Asiana Airlines, snapping up over 1.six billion dollars in shares and bonds.
With the takeover, Korean Air would massively boost its fleet and customer base, rising from the world's 18th largest airline to number ten.
But will it really benefit Korean Air to take on its heavily cash-strapped rival, and will having a single player in the market hurt customers?
There's also the issue of whether this deal can actually go through due to internal conflicts over corporate governance in Korean Air's parent company.
We address these issues today with Dr. Anup Srivastava, Associate Professor and Canada research chair at the University of Calgary in Alberta.
And Dr. JR Reagan, CEO of IdeaXplorer Global, join us from Daejeon. It's good to see you both again.
Dr. Srivastava: Korean Air, currently the world's 18th-largest airline in terms of fleet, will become Asiana's biggest shareholder with a 63.9 percent stake if the acquisition is completed. The question is, will it be competitive as a business in the global market?
Dr. Reagan: Korean Air and Asiana Airlines were competing fiercely for years so some say this will be the deal of the century. But won't it be the monopoly of the century? How will consumers be affected by this?
Are anti-trust regulators here going to scrutinize this deal properly?
3. Dr. Srivastava: What structural challenges have full service airlines been dealing with even before the pandemic?
Dr. Reagan: Korean Air's net losses narrowed to 651.84 billion won from January to September from 707.14 billion won compared to the same period last year, as it focused on winning more cargo delivery deals to offset a sharp decline in travel demand. But Asiana's net losses deepened to 623.85 billion won from 524.14 billion won during the same period. Why do you think Asiana has fared so poorly in comparison, and will Korean Air be able to deal with the baggage that the heavily indebted Asiana Airline will bring?
5. Dr. Srivastava: What is the merit of the objection raised by the private equity fund Korea Corporate Governance Improvement? Can it scuttle the deal?
Dr. Reagan: Government-owned KDB will invest 500 billion won in Hanjin KAL and buy 300 billion won of the company's exchangeable bonds if the deal goes ahead. Is this just a bailout in disguise?
Dr. Srivastava: Korean Air's parent company Hanjin Group will get over 800 million U.S. dollars from state-run Korea Development Bank if it acquires Asiana Airlines.
Should governments bail out airlines, many of which were in the red before the crisis? When does it make sense to use taxpayer's money to bail them out?
Dr. Reagan: Do you think the marriage of Korean Air and Asiana Airlines will be competitive globally, beyond the pandemic? Or what should they do to remain competitive?
9. Dr. Srivastava: Airlines have been trying out various ways of keeping afloat throughout the pandemic. What kind of changes do you think they will have to make going forward?
That was Dr. Anup Srivastava, from the University of Calgary in Alberta and Dr. JR Reagan, CEO of IdeaXplorer Global, joining us from Daejeon. Thank you both for your time.