This undated file photo shows airplanes of Korean Air Lines Co. and Asiana Airlines Inc. at Incheon International Airport, the main gateway of South Korea. (Yonhap)
SEOUL, Jan. 17 (Korea Bizwire) — Amid a decline in the number of passengers on international routes due to the aftereffects of the COVID-19 pandemic, South Korea’s two full-service carriers, Korean Air Lines Co. and Asiana Airlines Inc., which are scheduled to be merged, are expanding the scope of mileage redemption policies as part of efforts to reduce debts before the merger.
According to the electronic disclosure system of the Financial Supervisory Service, Korean Air’s deferred revenue amounted to 2.55 trillion won (US$2.14 billion) in the third quarter of last year, up 3.4 percent from a year ago.
Deferred revenue refers to income that, in general, is recognized when the mileage is exhausted. The value of mileage is not converted into income at the time when the first revenue transaction is made.
Korean Air joined hands with discount store chain E-Mart Inc. to sell vouchers in a mileage format that can be used to get discounts when purchasing or making payments for goods at E-Mart outlets.
Asiana Airlines sold a hotel package at the Vista Walkerhill Seoul in a mileage format last year. In addition, Samsung Electronics Co’s home appliances were sold through its mileage malls.
Asiana Airline posted deferred revenue of 911.2 billion won in the third quarter of last year, up 8.3 percent year on year.
Given the mileage accumulation rate and the areas of applications by credit card, Korean Air’s mileage is estimated to have a higher value than that of Asiana Airlines.
Accordingly, the merger between the two airlines could ignite opposition from Asiana Airlines customers. With this in mind, industry watchers said, the two airlines are pushing to reduce residual mileage as much as possible before their merger is completed.
Ashley Song (ashley@koreabizwire.com)
