The amount of unused mileage for Korean Air and Asiana Airlines in the first half of this year has reached approximately KRW 3.5 trillion (about $2.7 billion), as the companies continue their merger process. As the two airlines increase the availability of mileage seats, the number of passengers using mileage to purchase airline tickets is steadily rising.

According to the electronic disclosure system of the Korean Financial Supervisory Service on the 19th, Korean Air’s deferred revenue from mileage as of the end of June amounted to KRW 2.5278 trillion, while Asiana Airlines’ deferred revenue was KRW 975.8 billion. The combined deferred revenue of the two companies is KRW 3.5486 trillion.

Deferred revenue refers to income not yet recognized as revenue at the time of the initial sales transaction but recognized later when the mileage is used. This deferred revenue indicates the amount of accumulated mileage.

Compared to the same period last year, Korean Air’s deferred revenue increased by 4.5%, and Asiana Airlines’ increased by 3.5%.

The companies explained that the increase in deferred revenue is due to the extension of the mileage expiration period by up to three years during the COVID-19 pandemic when flights were restricted. Both companies have a 10-year validity period for mileage accumulated after July 2008. Compared to the end of the first half of 2019, before the pandemic, Korean Air’s deferred revenue increased by 15.2%, and Asiana Airlines’ by 38.3%.

In contrast to the increase in unused mileage, the number of customers using mileage to purchase airline tickets has steadily increased. Both airlines reported an increase in the “Bonus Passenger Kilometer” (BPK), a metric that estimates the use of mileage seats. BPK is calculated by multiplying the number of passengers using mileage tickets (bonus passengers) by the distance of the flight and summing up the total.

In the first half of this year, Korean Air’s BPK was 4.107 billion km, an 8.8% increase from the same period last year, and a 32.1% increase compared to the first half of 2019. Asiana Airlines’ BPK was 1.7 billion km, up 26.4% from the same period last year and 28.4% from the first half of 2019. Although the passenger recovery rate (for international flights) in the first half of this year compared to the first half of 2019 is 85% for Korean Air and 81% for Asiana Airlines, BPK has increased, the companies emphasized.

The biggest concern for the customers of both airlines is how the mileage policies will change after the merger. Depending on the integration method and conversion rate, customers may suffer financial losses. Naturally, Asiana’s mileage customers hope for a 1:1 conversion rate.

A Korean resident in Los Angeles said, “I have accumulated 40,000 miles with Asiana Airlines, and it would be very unfair if the mileage conversion favors Korean Air customers. Asiana Airlines customers haven’t done anything wrong, have they?”

However, Korean Air has stated that even after the merger with Asiana Airlines, there will be no immediate changes to the mileage operation. Korean Air plans to operate Asiana Airlines as a separate company for two years even after the acquisition, during which time the conversion rate for unused Asiana Airlines mileage will be determined following a review by the Korea Fair Trade Commission.

<Hongyong Park>