South Korea Grants Conditional Approval to Korean Air and Asiana Merger

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3 years ago

South Korea’s antitrust regulator said Tuesday it has decided to conditionally approve a deal by Korean Air, the country’s largest carrier, to buy Asiana Airlines.

The decision by the Fair Trade Commission (FTC) does not complete Korean Air’s proposed acquisition of the country’s second-largest airline, as antitrust regulators in major countries, such as the United States, are still reviewing the deal, Yonhap News Agency reported.

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Since January last year, the FTC has been reviewing Korean Air’s deal to buy a 63.88% stake in Asiana Airlines. The deal, valued at about 1.8 trillion won ($1.5 billion), was signed in November 2020.

The regulator said it decided to grant conditional approval for the pact, as it determined that the merger of the two airlines could hinder competition on 26 international and 14 domestic routes among the 87 overlapping routes they have been operating.

As conditions of the approval, designed to alleviate monopoly concerns, the FTC asked the two full-service airlines to return some takeoff or landing slots at airports and readjust flight licenses on certain routes over the next 10 years if other airlines seek to operate on them.

The regulator also said the two airlines will be restricted from increasing airfares and prohibited from reducing the number of seats in flight or the provision of services until they implement corrective measures.

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They also must not change their mileage accrual systems so that they are more disadvantageous to their customers than those implemented in 2019, pre-pandemic.

FTC head Joh Sung-wook said at a press conference that the decision will help alleviate commercial uncertainty in the aviation industry and prevent consumers from being harmed by the merger. He added that it is expected to lay the groundwork for maintaining or stimulating competition in the industry.

Korean Air applied in January last year for a review of its merger with Asiana to antitrust regulators in 14 other countries, including the U.S., the European Union and China.

The company has received approval from eight countries so far, including Singapore, Turkey and Vietnam.

If the acquisition is completed, Korean Air, which is currently the world’s 18th largest airline in terms of fleet, is expected to become the 10th largest globally.