• 

  Korean Air

  IATA/ICAO Code:

  KE/KAL

  Airline Type:

  Full Service Carrier

  Hub(s):

  Incheon International Airport

  Year Founded:

  1969

  Alliance:

  SkyTeam

  CEO:

  Walter Cho

  Country:

  South Korea

Various competition and regulatory agencies, including those in the European Union (EU) and China, haven't yet cleared Korean Air's planned merger with Asiana Airlines. In addition to approval from antitrust agencies at home, Korean Air needs clearance from the relevant antitrust agencies in most major markets where it flies. But so far, not all jurisdictions have come onboard.

South Korean antitrust authorities approve the deal, but other countries are slower

Korean Air wants to spend US1.5 billion to buy a 63.9% in smaller rival Asiana. Though styled as a merger, it is effectively a takeover that will see the Asiana brand disappear. The two airlines have traditionally competed on nearly 90 routes. Despite raising concerns the merger could harm competition on specific routes, South Korea's Fair Trade Commission approved the buyout earlier this year (with some conditions).

While antitrust authorities in at least eight other jurisdictions have approved the buyout, peer agencies in various other markets both airlines normally fly to, including the US, EU, Japan, China, UK, and Australia, have yet to greenlight the deal. And according to sources, it's the EU and Chinese authorities that will potentially prove the most problematic for Korean Air.

Korean Air's merger application is still in the EY's "pre-consultation stage"

Korean Air's application to the EU's antitrust authorities remains in the "pre-consultation stage" despite submitting that application in January 2021. Korean Air flies to 12 destinations in Europe, while Asiana services five European destinations. Seoul Incheon - Barcelona is one route authorities have identified the merged airline as having a monopoly on.

The various antitrust authorities typically are concerned with the anti-competitive impacts of mergers/takeovers/buyouts on routes that service their jurisdiction. But the EU has taken a more activist and broader attitude towards mergers recently, including blocking Air Canada's acquisition of Air Transat in 2021. The EU has reportedly asked other South Korean airlines that don't fly into Europe but potentially could in the future about their attitude towards the Asian buyout. The EU asked Tway Air and Air Premia about their financial situation, long-haul operational capabilities, and view on the deal.

Potentially deeper problems with China's approval

Potentially even more problematic is approval from China's antitrust authorities. That has also dragged on. So much so that Korean Air had to withdraw their first application and resubmit because the China-mandated 270-day deadline to finalize the application had expired. While any EU decision is largely non-political, that's not necessarily the case with China's decision.

China rarely makes such decisions in isolation. Instead, any decision is made in view of China's broader trade and economic goals and the state of relations with the applicant's home country. South Korea has tightened its security ties with the US lately, irritating Chinese authorities, and there are real fears the Korean Air/Asiana merger could be one of the casualties.

Meanwhile, the US is also taking its time. US authorities have told Korean Air that they believe the merger may impact fair competition and could run into roadblocks. That got a quick response from Korean Air, with Chairman Cho Won-tae traveling to the US recently to soothe concerns - or attempt to. Korean Air's application is in what's called the Second Request stage in the US.

"This often happens and doesn't mean the merger could be canceled," said a Korean Air spokesperson in a statement. "There is a strong tendency to prioritize local companies' interests when regulators review global merger and acquisition deals. Although we are proceeding slowly, we believe we are working towards a positive conclusion. Korean Air Lines will cooperate with requests of regulators abroad to get approval and carry out the acquisition of Asiana Airlines."

Source: The Korea Herald