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| A passenger jet of Korean Air takes off at Incheon International Airport on Nov. 18. Yonhap |
By Lee Min-hyung
Card companies are in a growing dilemma over frequent flyer benefits of their private label credit cards (PLCC) issued under partnerships with the nation's two largest carriers ― Korean Air and Asiana Airlines ― that are at the head of a high-stakes integration.
Given the complexity of the parties engaging in the deal, it will take at least a few months for card firms to draw a specific roadmap as to how to reshape their airline-affiliated card business strategies.
Officials from the card industry said they have no choice but to follow policy guidelines from Korean Air after the airline finalizes legal procedures to take over cash-strapped Asiana.
"Airlines hold the upper hand in negotiations with card firms over detailed policies on the firms' mileage-related benefits offered to customers," an official from a major card firm here said Wednesday.
Credit card issuers purchase frequent flyer points from airlines to provide the benefits to customers in line with their card use.
Some card firms ― such as Hyundai Card and Shinhan Card ― manage the loyalty programs on their own, while others ― such as Woori Card ― outsource the task to BC Card, which is the nation's largest payment processor.
"Korean Air and the government ― the Ministry of Land, Transport and Infrastructure or antitrust watchdogs ― will hold negotiations over how to handle the mileage-related policies, and notify card firms of the details later," the official said.
One of the most controversial issues is how to readjust loyalty benefits of Asiana-affiliated card owners, as the carrier's position will likely downsize following the integration.
Some customers are busy finding the best routes to use up their Asiana reward points before the integration finalizes amid concerns over possible devaluation of the accrued points.
The land ministry said customers with Asiana loyalty programs would not fall victim to the aviation deal, and they would be able to use the reward points in wider areas by accessing services affiliated with Korean Air.
Korea Development Bank (KDB), which is the main creditor of Asiana and the authority pushing for the integration, also said loyalty programs for Korean Air and Asiana will be integrated following the deal.
"Airlines hold the key in mapping out the mileage-related policies with their partners ― such as card companies ― so card firms are not in a position to proactively make suggestions to carriers over the PLCC," another official from the industry said. "We should keep a close watch over how Korean Air will handle the issue after lingering controversies surrounding the Korean Air-Asiana integration come to an end."
A spokesman of Korean Air declined to give details over the reward points-related disputes, as the integration process is still in its early days.
"We have to handle a series of other pending legal disputes raised by those who oppose the deal ― such as Korea Corporate Governance Improvement (KCGI)," the official said.
"On top of that, we have not yet carried out any due diligence on Asiana after the decision to take it over was announced last week. The loyalty program issues will be handled when the integration process is in full swing."
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