November 16, 2020

Korean Purchases Asiana for $1.6 Billion

The rumors were true. Korean Air — the largest carrier in South Korea — agreed Monday to purchase and merge with its chief rival, Asiana Airlines for $1.6 billion. Korean will spend $1.35 billion to purchase 63.9% worth of new shares of Asiana to become the airlines largest shareholder. It will spend the remaining $250 million on Asiana’s convertible bonds.

If that sounds like a lot of money for Korean to put up, well, it’s getting a whole lot of help. Hanjin KAL — Korean’s parent company — will receive a $722 million investment from the state-owned Korea Development Bank. That’s apparently the price the government has to pay to unload that financial mess on to someone else.

Asiana, which was founded in 1988, had been on the verge of collapse prior to the deal after an agreement this summer for a new buyer fell through. The airline received a sizable cash injection from the Korean Development Bank in September which only prolonged the suffering of the struggling airline.

The merger is expected to be a victory for Delta and SkyTeam, pending regulatory review, as the Atlanta-based airline has a joint venture with Korean for travel between Asia and the United States. Asiana is currently a member of Star Alliance and would potentially leave United and friends without a Korean partner. We will have more on this tomorrow morning at crankyflier.com.


American Halts Some Service to London

American Airlines is suspending service to London/Heathrow from three of its key hubs for December due to weakened demand to the UK. AA will suspend flights from Charlotte, Chicago/O’Hare, and New York/JFK for the month, with all three cities expected to resume service to London in January.

AA’s joint venture partner British Airways will continue to operate its flights to Heathrow from JFK, O’Hare, and other U.S. airports despite AA’s suspension, but travelers may find it preferable to simply swim instead.

With the elimination of these three routes, American will now only fly two routes to Europe between December 1 and January 5: Dallas/Fort Worth (DFW) to both London/Heathrow and Frankfurt. Despite the near-cessation of passenger flights, American will still fly cargo-only flights to Heathrow from both JFK and O’Hare. 


Aer Lingus Receives US Permission to Join Oneworld JV

Aer Lingus received tentative permission from the DOT to join the American/British Airways/Iberia/Finnair transatlantic joint venture. The airline, which is still awaiting approval from the UK, will be permitted to fully coordinate with the other carriers on fares, scheduling, and seat cushion colors.

The DOT defended its decision, stating that Aer Lingus has less than 3% of the transatlantic passenger load and has healthy competition from fellow transatlantic LCC Norwegian. That’s quite the statement considering Norwegian actually stopped flying from Ireland to the U.S. before the pandemic began. It may also not be around much longer in any form, currently only flying a handful of routes in Norway as its cash dwindles.

The DOT determined that moving Aer Lingus into the joint business “would be unlikely to impact competition for 90 percent of U.S.–Europe passengers.” It continued, “as for the other 10 percent, we don’t care about those punks.”


Sun Country Receives Additional Cash from Feds

Minneapolis-based LCC Sun Country Airlines received an additional $45 million in funding from the federal government in the form of a CARES Act-enabled loan. The airline previously received $60 million in CARES Act money from the treasury during Q2 of 2020, which took place approximately 150 years ago.

The Treasury will fund the full loan to prop up SY’s liquidity to keep the airline operating. The loan will mature on October 24, 2025 and includes a 3% payment-in-kind of annual interest. The feds also required that SY include a coupon code that unlocks free seat assignments for treasury employees, per our made-up guidelines in the CARES Act.

Some interest groups are unhappy with the loan as Sun Country’s parent company, Apollo Global Management, sold a minority share to Amazon last year, and as many know, Amazon is…not struggling. SY is also operating dedicated freighters for Amazon. Those questioning the deal want to know why can’t minority owner Amazon use some if its record earnings from the pandemic to prop up Apollo’s assets, including Sun Country, instead of taxpayers. The answer, of course, is because Sun Country’s Prime membership expired and Amazon then refused to offer any sort of loan.


Heathrow Braces for Ridiculous Pre-Christmas Strikes

Airport workers at London’s Heathrow Airport are contemplating a series of strikes in the pre-Christmas period to protest what it says is the airport’s use of the pandemic as a “smokescreen” to cut worker wages.

The union, which apparently hasn’t noticed the 82% drop of traffic at the airport in October, says 85% of the airport’s staff voted in favor of the strike. Those threatening to walk off the job include firefighters, security guards, engineers, and baggage handlers. Seriously, folks, an 82% drop in traffic. Where do you think all the people went? 

Theoretically, Heathrow would not be permitted to operate without sufficient fire coverage, and cargo operations would take a big hit during the pre-holiday period when many freighters are carrying items on behalf of Santa, not to mention delivery of a potential vaccine.

The first strike is scheduled for December 1 and will last 24 hours. The union also is planning to organize strikes at shopping malls across the country as it says there has been no downturn in in-person shopping as well as at restaurants and bars. Other rumors include a possible strike amongst workers at soccer football stadiums across the UK who also haven’t noticed a lack of attendance at any matches this season.


Airline Potpourri

  • Delta won an award. It does that a lot.
  • Eastern Airlines — the current North American version — has acquired five used Boeing 777s.
  • Emirates SkyCargo is beginning A380 cargo charter operations since there is no need for another million ton paperweight in Dubai.
  • Etihad will begin regular service from Abu Dhabi to Tel Aviv with year-round, daily service beginning March 28.
  • FlySafair, a South African LCC announced an interline agreement with Emirates.
  • Qatar will resume service to Phuket, Thailand (HKT) on December 4.
  • Ravn Alaska flew for the first time since it went under during the early days of the pandemic, operating a charter flight between Anchorage and Dutch Harbor (DUT).

Andrew’s Moment of Levity

Prior to my surgery last month, I asked the surgeon if I could administer the anesthetic myself. “Sure,” he said, “knock yourself out!”