[Q&A] How Does the 'Mega Carrier' System Affect You?

Mileage, Airline Alliances, Route Reductions, and Fare Direction Outlook

[Image source=Yonhap News]

-What will happen to Asiana Club mileage?

▲The mileage will not disappear. Historically, after mergers and acquisitions (M&A) between airlines, frequent flyer programs (FFP) have often been integrated. The nominal value of mileage is likely to change significantly. Industry insiders estimate that the value of Asiana Club mileage corresponds to about 70-80% of the value of Skypass mileage. Membership tiers will also inevitably be adjusted. Currently, Korean Air operates three tiers (expected to adjust to four tiers in 2022), while Asiana Airlines operates four tiers. Since the value of mileage accumulated to achieve these tiers differs, it is unlikely that this will be directly inherited as is.

-Will the 'Star Alliance' benefits no longer be available?

▲It is highly likely. Korean Air is a founding leader of SkyTeam, one of the world's three major airline alliances, and globally, there have been many cases of airlines leaving or switching alliances during M&A processes. This is somewhat disappointing for consumers who have been accumulating Asiana Club mileage with the connectivity and lounge benefits of Star Alliance in mind. Star Alliance has 26 member airlines, surpassing the latecomer SkyTeam (19 members) in terms of route network. This means the options will be reduced accordingly.

-Will the routes be drastically reduced?

▲It is true that most of the long-haul routes of both airlines overlap, so restructuring is being discussed. However, since flight frequency is directly linked to revenue, many expect Korean Air to strengthen competitiveness by diversifying time slots through discussions with authorities in the future. Woo Ki-hong, President of Korean Air, said, "Since we will become one company, it will not be the same schedule as now but will be coordinated," adding, "Diversification of time slots and destinations, as well as aircraft adjustments, are also possible."

-Will fares skyrocket if the merger of the two major airlines creates an oligopoly market?

▲When Korean Air was the only airline operating the Incheon-Ulaanbaatar (Mongolia) route, fares on that route enjoyed a monopoly effect, being comparable to fares on most long-haul routes. If this merger is completed, a monopoly market by the Hanjin Group will be formed, so such concerns are natural. Since the East Asian aviation market is not a perfectly competitive market like Europe, there are also opinions that the presence of foreign airlines has limited ability to control fare increases. Concerns are greater for long-haul routes operated only by major airlines. However, some predict that fares will not rise significantly because foreign airlines occupy about 33% of the domestic aviation market. Both the Hanjin Group and authorities have stated that "there will be no sudden fare hikes."

Some foresee medium- to long-term fare increases for separate reasons. Before COVID-19, the domestic aviation industry suffered from overinvestment and oversupply, so after restructuring, the perceived fares may rise somewhat. 'Seat distancing' has become a hot topic between the aviation industry and aircraft manufacturers due to COVID-19. There is a claim that the seat pitch of newly manufactured aircraft should be arranged wider than now, and if this becomes a reality, the number of seats per aircraft will inevitably decrease, which is a factor for fare increases.

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