Seoul, South Korea – Korean Air announced on Monday that the European Commission (EC) has conditionally approved the merger between Korean Air and Asiana Airlines, marking a significant milestone in the long-awaited corporate combination.
The EC’s decision came after concluding that all preconditions for the merger had been met. With this approval, only the US antitrust authorities remain as the final hurdle.
“We have informed the US antitrust authorities about this final approval and other subsequent procedures,” said a Korean Air official. “We plan to finalize the corporate combination process by incorporating Asiana Airlines as a subsidiary within this year.”
In February, the EC granted conditional approval for the merger, stipulating that Korean Air must divest itself of four European routes (Rome, Paris, Barcelona, and Frankfurt) and sell Asiana Airlines' cargo business.
To comply with these conditions, Korean Air has provided extensive support to T’way Air, including aircraft, flight crews, and maintenance services. The airline also sold Asiana Airlines’ cargo business to Air Incheon to address concerns about monopolistic practices in the cargo market.
The final hurdle lies with the US Department of Justice (DOJ). Unlike other competition authorities, the DOJ does not publicly announce merger approvals. Instead, it typically files an antitrust lawsuit if it intends to block the merger. Industry experts anticipate that the DOJ will not take any significant action to oppose the merger.
Korean Air plans to complete the merger process within the next month. The airline will invest 1.5 trillion won to acquire 131,578,947 shares (63.9% stake) of Asiana Airlines through a third-party allotment. Korean Air intends to operate Asiana Airlines as a subsidiary for two years while working towards the full integration of the two airlines.
The merger of Jin Air, Air Busan, and Air Seoul, low-cost carriers under Korean Air and Asiana Airlines, is also expected to create a "mega LCC," significantly reshaping the industry landscape.
However, concerns have been raised about potential monopolistic practices and fare increases due to the lack of competition. Critics argue that the government must closely monitor the situation to prevent any anti-competitive behaviors. According to a research team at Korea Aviation University, the combined market share of the merged airline and its LCC subsidiaries could reach up to 73% in the international passenger market.
Consumers may face fewer choices as overlapping routes are consolidated and LCCs are integrated. Additionally, the merger raises questions about the conversion of mileage programs and potential job cuts. Korean Air is required to submit a plan to merge the two airlines' mileage programs within six months of the merger and obtain approval from the Fair Trade Commission. Any changes to the mileage program must be no less favorable to consumers than the program in place at the end of 2019.
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