As the announcement of the mileage integration plan between Korean Air and Asiana Airlines approaches, consumer interest is focused on the merger ratio calculation. While mileage earned through flights can be integrated on a 1:1 basis, there are forecasts that converting affiliate miles accumulated through credit card usage and other means will be difficult.
According to the aviation industry on the 8th, Korean Air plans to submit a proposal containing the mileage integration ratio and conversion plan with Asiana to the Fair Trade Commission by the 12th.
Last December, Korean Air incorporated Asiana Airlines as a subsidiary and decided to submit an integration proposal to the Fair Trade Commission within six months for approval review.
Consumers are paying attention to the mileage integration ratio. Airline miles are divided into flight miles and affiliate miles earned through credit card companies, hotels, rental cars, and shopping mall usage.
Flight miles are likely to be converted on a 1:1 basis. Flight miles are accumulated based on the flight distance between cities as defined by the International Air Transport Association (IATA). Even if the airlines differ, the distance between cities does not vary significantly, so the accumulated miles are similar.
In the mergers of United Airlines and Continental Airlines in 2011, Delta Air Lines and Northwest Airlines in 2008, and Air France and Netherlands KLM in 2004, the flight miles of both companies were merged on a 1:1 basis.
There are forecasts that the integration ratio of affiliate miles will differ. This is due to the varying mileage value set in the market by each airline. Typically, the value of 1 mile is known to be 15 won for Korean Air and around 11 to 12 won for Asiana Airlines. While it varies by card, usually, Korean Air miles are earned at a rate of 1 mile for every 1,500 won, whereas Asiana has been giving 1 mile for every 1,000 won.
At the end of last year, the National Assembly Research Service suggested in a report titled "Methods for Securing Competitiveness in the Aviation Industry and Protecting Consumers After the Launch of the Integrated Airline" that "the integration ratio of the two companies' miles should be determined at a reasonable level (e.g., 1:0.9) considering international precedents, price and service disparities, the potential for expanding mileage usage opportunities, and the impact on airline alliances."
Korean Air is calculating the mileage conversion ratio through consulting firms and plans to decide on the approval of the integration proposal after receiving it from the Fair Trade Commission before the launch of the integrated airline by the end of next year.
As of the end of the first quarter, the remaining mileage balance (deferred revenue from mileage) was 26.005 billion won for Korean Air and 9.519 billion won for Asiana, totaling 35.724 billion won. Korean Air increased by 1.8% compared to the end of last year, while Asiana Airlines decreased by 0.9%.