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Korean Air takeover of Czech Airlines to boost global ranking
Publication Date : 08-03-2013
Korean Air’s potential acquisition of a stake in Czech Airlines appears to be a bigger deal than expected.
The 44 per cent stake in the European airliner would catapult the local airliner to become the world’s 21st largest, industry data showed Thursday.
The Korean flag carrier this week placed a bid to buy the shares in Czech Airlines, but without seeking managerial control of the European airliner.
Korean Air and Czech Airlines ― both part of the Sky Team global alliance ― claimed 0.6 per cent and 0.2 per cent of the global market in 2011, respectively, according to Euromonitor International, a London-based marketing intelligence firm.
Their combined market share of 0.8 per cent would make them one of the top 21 airlines based on data from 2011, when Korean Air and Czech Airlines came in 27th and 66th, respectively.
“Network expansion is one of the major components of the strategic approaches of many airlines in an effort to boost their revenues and profits,” said Nadejda Popova, a senior analyst at Euromonitor International.
“By acquiring a stake in Czech Airlines, Korean Air is also keeping an eye on the Eastern European markets. Indeed, in 2011, Eastern Europe was the region which recorded the highest volume growth of air arrivals, of over 9 per cent.”
Total bids for Czech Airlines amount to an estimated 45 billion won to 50 billion won (US$41 million-$46 million).
Korean Air could expect to benefit from the network expansion by sharing European routes outside its reach and launching joint marketing campaigns, company officials said earlier.
“Despite concerns about the cash flow of Korean Air recently, the company has enough room to cover the acquisition price that is not so high,” said Kim Dae-sung, an analyst at Hyundai Securities.
“As Czech Airlines operates in only two Asian countries, Uzbekistan and Kazakhstan, there is also no overlap between the networks of the two airliners.”
This marks the first attempt by a Korean airliner to seek a stake in a foreign counterpart.
Czech Aeroholding, the state-controlled parent company of the airline, however, would remain as the largest shareholder even following the stake acquisition by Korean Air.
Currently, Korean Air flies to and from 12 destinations in Europe and Russia.
Qatar Airways, the state-owned flag carrier of Qatar, has also reportedly expressed an interest in buying Czech Airlines.
Czech Airlines is a major carrier in Europe that operates 26 aircraft and flies to 62 cities in 41 countries.