Asiana Airlines Inc., South Korea’s second-largest full-service carriers, has been losing its competitive edge as its fleet plummeted and recruitment of flight attendants halted while it waits for the merger with bigger rival Korean Air Lines Co. to be approved.

Korea Development Bank (KDB), one of the major creditors of the carrier, has been waiting for the final approval decision to inject a chunk of funds into Asiana Airlines. The industry warned that the merger wouldn’t be able to produce the desired outcomes if the current situation is left unaddressed.

“The approval process for the merger has completed in 10 out of 13 competent countries, and we have only the approvals by the U.S., European Union and Japan left,” said Kang Seog-hoon, KDB’s chairman on Tuesday. “The final results for the merger are expected to be unveiled as soon as the third quarter of this year but can be delayed as well. We are not thinking about a chance of a failure for the merger and the aftermath.”

“As we have only two or three months left until the final stages of the merger complete, there are no specific measures we should take,” Kang added. “Asiana Airlines has unexpectedly benefited from growing demand for travel, which I believe is good news for the company‘s financial conditions.”

Despite Kang’s remarks, the industry said the deteriorating competitiveness of Asiana Airlines is reaching an alarming level.

According to industry sources, its fleet size has declined, highlighting the urgent need to obtain new aircraft. Before the merger, Asiana Airlines had 85 aircraft. Now it has only 78. It‘s the first time in a decade for carrier to have less than 80 aircraft.

The smaller fleet of aircraft came as Asiana Airlines has seen more aircraft on the end of lease than on new leases. Many airlines lease aircraft from other carriers and then return it back to the lessors when the lease ends. However, Asiana Airlines acquired only one new aircraft while returning six in 2022.

As aircraft is one of the key assets for passenger carriers, a smaller fleet of aircraft in an airline can lead to fewer routes and a smaller capacity for flight operations. In addition, authorities can withdraw the allocated slots, or authorization to use specific airports on a particular day, from airlines if they fail to use the slots for a given period of time. Airlines end up losing their competitive edge and facing growing complaints from passengers when they lose allocated slots.

Unlike its rivals that have recently rushed to hire new employees, recruitment for flight attendants at Asiana Airlines has come to a halt. As a result, its workforce, which stood at 9,155 in 2019, fell by approximately 1,000 to 8,248 at the end of March.

Asiana Airlines has seen its financial condition get worse over time. Its debt-to-equity ratio reached 2,013 percent in the first quarter, up from 1,780 percent in the previous quarter.

By Oh Soo-hyun, Chae Jong-won, and Han Yubin

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