{"id":2201728,"date":"2023-07-18T18:28:29","date_gmt":"2023-07-18T09:28:29","guid":{"rendered":"https:\/\/koreapro.org\/?p=2201728"},"modified":"2023-07-19T17:31:45","modified_gmt":"2023-07-19T08:31:45","slug":"financial-turbulence-pilots-strike-threatens-asiana-airlines-merger-plans","status":"publish","type":"post","link":"https:\/\/koreapro.org\/2023\/07\/financial-turbulence-pilots-strike-threatens-asiana-airlines-merger-plans\/","title":{"rendered":"Financial turbulence: Pilots\u2019 strike threatens Asiana Airlines\u2019 merger plans"},"content":{"rendered":"

Asiana Airlines, one of South Korea\u2019s leading carriers, is grappling with a <\/span>pilots\u2019 union strike<\/span><\/a> set to begin on July 24, which initially began last month as a work-to-rule protest over wage increases.\u00a0<\/span><\/p>\n

With about 100 pilots threatening to go on strike, the unrest has already led to the cancellation of two international and 10 domestic flights, while delaying another 56 flights, presenting significant operational and financial challenges for the airline.<\/span><\/p>\n

Asiana\u2019s troubles could impact its <\/span>planned merger<\/span><\/a> with Korean Air, another flagship carrier, which is currently attempting to acquire the airline. The proposition has been met with varying degrees of <\/span>acceptance<\/span><\/a> and <\/span>resistance<\/span><\/a> from international regulatory bodies \u2014 all citing concerns about how the merger will impact competition.<\/span><\/p>\n

Korean Air has spent approximately <\/span>$79 million<\/span><\/a> (100 billion won) in legal advisory fees worldwide over the past two years. Hence, the company has a strong incentive to push ahead with its <\/span>$1.4 billion<\/span><\/a> (1.8 trillion won) deal. However, if the deal goes through, Korean Air would also be legally responsible for Asiana\u2019s debts and liabilities, thus giving it an incentive to participate in negotiations on Asiana\u2019s wage disputes.<\/span><\/p>\n

FINANCIAL LOSSES<\/b><\/p>\n

As the work-to-rule protest escalates into a full-blown strike, flight cancellations and delays will impair Asiana\u2019s reliability in the eyes of its customers and potentially lead to a loss of market share as travelers might opt for more reliable airlines. The direct financial impact is also substantial, with the cost of cancellations, delays and increased maintenance likely eating into the company\u2019s revenue.<\/span><\/p>\n

Asiana cannot afford to incur more financial losses. The company <\/span>reported<\/span><\/a> in May that its net losses widened to $43.1 million (54.36 billion won) in the first three months of this year, compared to a $36.9 million (46.55 billion won) loss during the same period last year.<\/span><\/p>\n

The South Korean won\u2019s relative weakness against the U.S. dollar has increased fuel and maintenance costs.<\/span><\/p>\n

The pilots\u2019 demands for a 10% wage increase reflect deeper unrest within Asiana\u2019s workforce. The company countered with an offer of a 2.5% wage increase and stated that accepting the union\u2019s demands was financially impossible. This unrest could destabilize employee morale across the board, leading to further operational difficulties.<\/span><\/p>\n

This deadlock suggests protracted industrial action, further damaging the already financially troubled airline.<\/span><\/p>\n

\"\"

A plane departing from an airport | Image: 4045 via Freepick<\/a><\/em><\/p><\/div>\n

SURVIVAL STRATEGY<\/b><\/p>\n

The planned merger between Korean Air and Asiana Airlines is primarily seen as a survival strategy amid the massive financial turmoil caused by the COVID-19 pandemic. The merger is intended to create a unified, more robust entity capable of weathering the industry downturn, reducing overheads and enhancing operational efficiencies.<\/span><\/p>\n

However, the merger has encountered regulatory hurdles from international antitrust authorities. While the deal has received the green light from <\/span>11 countries<\/span><\/a>, approval from the EU and Japan remains pending. And it has met stiff resistance from the U.S.<\/span><\/p>\n

The U.S. Department of Justice (DOJ) is reportedly contemplating a lawsuit to <\/span>block the merger<\/span><\/a> over concerns that it could harm competition in passenger and cargo transportation between the U.S. and Korea.<\/span><\/p>\n

Similarly, the European Commission has raised objections, <\/span>asserting<\/span><\/a> that the merger could restrict market competition on several European routes. Japan\u2019s stance remains unknown.<\/span><\/p>\n

These international concerns stem from the potential monopoly that the merger could create. Regulatory bodies fear the merger could limit competition, potentially leading to higher fares and reduced service quality. Consequently, these uncertainties pose substantial barriers to the completion of the merger.<\/span><\/p>\n

The pilots\u2019 strike could not have come at a worse time for Asiana. Although the two carriers have stated<\/a> that they still plan to go ahead with the merger, further loss of revenue and damage to Asiana\u2019s reputation could lead to significant financial ramifications, threatening the viability of the merger.<\/span><\/p>\n

For Korean Air, the strike poses considerable concerns. <\/span>Hanjin Group<\/span><\/a>, Korean Air\u2019s parent company, will need to factor in the potential for protracted labor issues and the resultant financial implications. Korean Air would inherit not only Asiana\u2019s assets, but also its liabilities, which would now include any increased wage demands conceded to the pilots. This situation could prompt a re-evaluation of the merger terms.<\/span><\/p>\n

SIGNIFICANT HURDLE<\/b><\/p>\n

Korean Air\u2019s management team will likely play an active role in the negotiations with the pilots\u2019 union or seek assurances from Asiana that the labor dispute will be resolved before the completion of the merger. Korean Air could also consider restructuring the deal to mitigate potential risks.<\/span><\/p>\n

Ultimately, the strike presents a significant hurdle for the proposed merger. Its resolution, or the lack thereof, could significantly impact the negotiations, the final deal and the future success of the combined entity.<\/span><\/p>\n

Labor disputes in the context of airline mergers can be problematic. The <\/span>proposed merger<\/span><\/a> of JetBlue Airways and Spirit Airlines is a case in point.<\/span><\/p>\n

The Transport Workers Union, which represents 6,800 JetBlue flight attendants, asked U.S. Attorney General Merrick B. Garland and Transportation Secretary Pete Buttigieg to prevent the merger, fearing that JetBlue would not honor worker contracts after acquiring Spirit.<\/span><\/p>\n

The case serves as a reminder that addressing labor concerns early in the merger process is vital. A failure to resolve such issues can jeopardize the deal and lead to operational problems post-merger.<\/span><\/p>\n

Asiana Airlines\u2019 <\/span>unionized workers<\/span><\/a> have similarly questioned the merger plans with Korean Air. Thus, Korean Air and Asiana Airlines will likely strive for a quick and amicable resolution with the pilots\u2019 union to prevent similar pitfalls.<\/span><\/p>\n

Edited by Alannah Hill<\/span><\/i><\/p>\n

Business & Economy<\/span><\/a><\/div>","protected":false},"excerpt":{"rendered":"

Asiana Airlines, one of South Korea\u2019s leading carriers, is grappling with a pilots\u2019 union strike set to begin on July 24, which initially began last month as a work-to-rule protest over wage increases.\u00a0 With about 100 pilots threatening to go on strike, the unrest has already led to the cancellation of two international and 10 […]<\/p>\n","protected":false},"author":10207,"featured_media":2201738,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"footnotes":""},"categories":[21],"tags":[24],"yoast_head":"\nFinancial turbulence: Pilots\u2019 strike threatens Asiana Airlines\u2019 merger plans - KOREA PRO<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/koreapro.org\/2023\/07\/financial-turbulence-pilots-strike-threatens-asiana-airlines-merger-plans\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Financial turbulence: Pilots\u2019 strike threatens Asiana Airlines\u2019 merger plans - 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