Korean Air's proposal for mileage integration with Asiana Airlines was immediately rejected by the Fair Trade Commission, which indicates that a final approval will face difficulties. As the Lee Jae-myung administration has just begun, a rigorous examination of the mileage integration plan is expected to take place under the justification of consumer rights protection.
The Fair Trade Commission pointed out that there were deficiencies in the mileage integration plan submitted by Korean Air and requested modifications and supplements. This is due to the plan providing fewer options for mileage usage than those previously available with Asiana Airlines, and the lack of specific explanations regarding the integration ratio.
As President Lee Jae-myung emphasized 'a fair market order' in his inauguration speech, there are analyses suggesting that the merger plan does not meet government expectations. The mileage integration plan is a matter of public interest, and the Fair Trade Commission believes it should be established to meet the expectations and standards of the people. The number of members from both airlines totals 45 million.
The Fair Trade Commission set approval criteria including: ▲ protecting the trust of Asiana Airlines consumers and ensuring that no disadvantages occur, and ▲ ensuring that the rights of consumers from both Korean Air and Asiana Airlines are balanced. Although Korean Air has not disclosed the mileage integration plan, it is assumed to contain elements that may be somewhat unfavorable to existing Asiana Airlines consumers.
In the airline industry, changes in airline alliances and the conversion ratio of partnership miles are regarded as key issues. Asiana Airlines passengers will have to use SkyTeam, to which Korean Air belongs, instead of the previously affiliated Star Alliance. This may create inconvenience for Asiana Airlines members, as there are more airlines in Star Alliance.
There are also differing opinions regarding partnership mileage. Korean Air appears to have proposed a plan to convert boarding miles, which are calculated based on flight distance, at a 1:1 ratio, while partnership miles accrued through partner credit cards, hotels, and rental cars are likely to be integrated at a differential ratio.
For credit card partnership miles, Korean Air recognizes 1 mile for every 1,500 won, while Asiana Airlines recognizes 1 mile for every 1,000 won. In market value terms, this equates to a ratio of about 1:0.7. If this ratio is changed, the partnership miles accumulated by Asiana Airlines members so far would decrease by 70%. Conversely, if it is converted at a 1:1 ratio, it would undermine the benefits of existing Korean Air members.
Airline miles are considered deferred revenue, which is recorded as a liability in accounting. As of the end of the first quarter of this year, Korean Air's remaining deferred revenue from miles stands at 2.62 trillion won, while Asiana Airlines' figures at 951.9 billion won.
Lee Hwi-young, a professor at Inha Technical College's Department of Aviation Management, said, 'Typically, customers who value miles for purchasing airline tickets and upgrading seats respond sensitively. There are also plans to provide ancillary services like hotel accommodation vouchers to Asiana Airlines members.'