South Korea’s FTC conditionally OKs Asiana-Korean Air merger

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Korean Air
(PHOTO: Korean Air)

https://www.collinsaerospace.com/sustainabilitySouth Korea’s antitrust regulator said Tuesday it has decided to conditionally approve a deal by Korean Air Lines to buy the debt-ridden Asiana Airlines. The Fair Trade Commission (FTC)’s decision does not complete Korean Air’s proposed takeover of the country’s No. 2 carrier as antitrust regulators in major countries, including the United States, are still reviewing the deal.

Since January last year, the FTC has been reviewing Korean Air’s deal to buy a 63.88 percent stake in Asiana Airlines. The deal, valued at some 1.8 trillion won (US$1.5 billion), was inked in November 2020. The regulator said it has decided to give conditional approval to the deal as it determined the combination of the two airlines could hamper competition on a significant number of flight routes. The FTC said the two carriers’ merger could hurt competition on 26 international and 14 domestic routes among the 87 overlapping routes that they’ve been operating.

The FTC requested the two full-service carriers return some take-off or landing slots at airports and readjust flight licenses in certain routes over the next 10 years if other airlines seek to operate on those routes. The regulator also said the two airlines will be restricted from raising flight fares and banned from reducing the number of flight seats or the supply of services until they implement the corrective measures. They should not also change their mileage systems so as to make them more disadvantageous to their customers than those that were implemented in the pre-pandemic year of 2019.

“The decision will help ease business uncertainty in the airline industry and prevent consumers from suffering damage due to the combination. It is expected to set the tone for competition to be maintained or spurred in the airline sector,” FTC chief Joh Sung-wook told a press briefing.

The approval is expected to help reshape the country’s airline sector that has been reeling from the fallout of the COVID-19 pandemic. But critics said the conditions put forward by the FTC still appear insufficient to address monopoly concerns in the country’s airline industry. In January last year, Korean Air asked antitrust regulators of 14 other countries, including the U.S., the European Union and China, for the review of its combination with Asiana. The company has received approval from eight countries so far, including Singapore, Turkey and Vietnam.

The FTC said it plans to hold a deliberation session to potentially add more measures that the two carriers may have to take, depending on the results of reviews by foreign regulators. If the takeover is completed, Korean Air, currently the world’s 18th-largest carrier by fleet, is expected to become the world’s 10th-biggest airline.

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