Korean Air-Asiana union hits snag as U.S. delays merger review

[Photo by Kim Ho-young]

Korean Air Lines Co. has met another stumbling block in completing a merger with its smaller rival Asiana Airlines Inc. after the U.S. authorities said it needed more time before making its decision on whether to approve the combination.

This comes after the U.K. anti-trust authority asked for South Korea’s biggest national flag carrier to address concerns of a possible monopoly on flights between London and Seoul.

The U.S. Justice Department was expected to make its decision on the merger between Korean Air and Asiana Airlines overnight, but with the delay in U.S. decision, Korean Air is uncertain when a ruling will be made. A decision was supposed to come out 75 days after Korean Air submitted documents to the Justice Department for a review at the end of August.

The U.S. is expected to take a deep look into how competition will be affected especially on the route between North America and South Korea from this merger. The authorities may need more time to decide whether the merger would create a monopoly given that Korean Air and Asiana offer many flights to various destinations in the U.S. In 2019, Korean Air’s sales from U.S. operations accounted for 29 percent of its total revenue.

Should U.S. approve the merger, it would give a positive signal that anti-trust authorities in the European Union, Japan, China and the U.K. could follow suit. But if the U.S. doesn’t approve, that would be a major blow to the Korean airlines.

Korean Air will cooperate with the U.S., an official from the carrier said, adding that it has submitted relevant documents and addressed requests to ensure that a decision is made.

There are speculations that the U.S. authorities will approve the merger only if there is a stronger corrective measure than the one Korean Air received from South Korea’s Fair Trade Commission in February.

Earlier this week, U.K.’s Competition and Markets Authority requested Korean Air to submit plans on how it will reduce its dominance on flight between London and Seoul as it viewed the merger with Asiana could reduce competition, resulting in higher fares for passengers and lower quality of services.

Korean Air has sought approval from 14 countries for the merger, of which nine have either gave their nods or ended their review because they are not in a position to rule on such a move.

Korean Air shares inched up 0.39 percent to 25,850 won ($19.40) on Thursday morning.