Many Challenges Ahead Beyond the Birth of a Mega National Airline

[Image source=Yonhap News]

[Asia Economy Reporters Kim Hyewon and Yoo Jehun] There are many hurdles to overcome for the birth of a mega national airline. The 'Shareholders' Coalition for the Normalization of Hanjin Group (3-Party Coalition),' an adversarial merger and acquisition (M&A) force against Hanjin KAL, is showing moves to block the rights offering, and there are also challenges to resolve monopoly controversies and anti-national sentiment.

First, if Hanjin KAL proceeds with the capital increase against KDB Industrial Bank, the 3-Party Coalition is highly likely to file an injunction to prohibit the issuance of new shares or initiate additional lawsuits. If the third-party allotment rights offering succeeds, KDB will become the third-largest shareholder of Hanjin KAL, and Chairman Cho Won-tae of Hanjin Group can instantly overturn the shareholding structure that is currently disadvantageous to the 3-Party Coalition.

It could also be embroiled in monopoly controversies. According to the Ministry of Land, Infrastructure and Transport's Aviation Traffic Information System, the combined international route market share of Hanjin-affiliated airlines (Korean Air and Jin Air) and Asiana Airlines-affiliated airlines (Asiana Airlines, Air Busan, and Air Seoul) reaches 73.1% when excluding foreign airlines. On long-haul routes such as North America and Europe, where low-cost carriers (LCCs) have not entered, they occupy 100% of the market.

Since the multiple private airline system that has lasted for 32 years is collapsing, backlash is inevitable. In particular, public sentiment toward Hanjin, shaped by incidents such as the 'water cup abuse,' 'nut rage,' and the 'siblings' conflict,' is expected to find it difficult to accept an oligopoly system. A source from a national airline said, "When Asiana Airlines started as the second private airline in 1988, the intention was to introduce a competitive system into the domestic airline industry, which was monopolized by Korean Air. If the acquisition materializes, especially on long-haul routes, Hanjin Group will have dominant influence, making controversies over oligopoly or preferential treatment to a specific company inevitable."

However, there is also an analysis that the impact may be limited since foreign airlines are rapidly entering long-haul routes and LCCs have a significant share in medium- and short-haul routes. Another industry insider commented, "In some respects, Kumho was given the opportunity of a multiple private airline system for 30 years but failed to capitalize on it and is now in a management crisis. From the perspective of protecting a national key industry, this acquisition should also be viewed in that light."

This content was produced with the assistance of AI translation services.