Korean Air-Asiana merger faces more delay

Korean Air's Boeing 787-9 (Yonhap)

A planned merger of South Korea’s top two air carriers is expected to face more delay as the European antitrust authorities have temporarily halted its probe into the 1.8 trillion won ($1.37 billion) high-profile deal.

Korean Air said Thursday it has requested the European Commission to extend the deadline for its final decision on the merger with its smaller rival, Asiana Airlines, saying it will come up with measures to relieve their antitrust concerns.

“We have asked for a deadline extension and the EC accepted the request,” Korean Air said.

“The company will do its best to come up with measures that can address their antitrust concerns and finalize the discussions within the new deadline.”

This is the second time European authorities have delayed their decision on the Korean Air-Asiana deal, since it first opened its in-depth investigation in February. Industry sources say another two-month grace period is presumed to have been offered to Korean Air.

In November 2020, Korean Air announced its bid to acquire its money-losing crosstown rival, paving the way for it to become the largest airline in Northeast Asia. Following the announcement, the company submitted documents to get antitrust approval from 14 countries.

So far, the deal has received approval from 11 countries, with pending decisions in the US, Europe and Japan.

European regulators expressed concerns in its preliminary report in May over potential antitrust issues, saying the merged unit could dominate some passenger and cargo flights connecting Korea and European cities such as those to Paris, Frankfurt, Rome and Barcelona.

But experts here have offered a positive outlook, saying the deal could receive a green light ultimately.

“The EC would have rejected the deal already if Korean Air had not shown its strong commitment to closing the deal,” Hwang Yong-sik, a professor at Sejong University's School of Business & Economics and the head of the Civil Aviation Business Research Institute.

“If Korean Air continues its efforts to respond to the EC’s demand, the company will be able to get conditional approval,” he added.

Korean Air has been keen to complete the merger.

“I feel strongly, I’m going to push it all the way,” Korean Air CEO Walter Cho said during an interview with Bloomberg Television at a global aviation gathering in Istanbul earlier this month.

“We are in this 100 percent, we will make it happen regardless of what we have to give up.”

Hwang, the professor, said Korean Air could face some financial losses if it decides to give up additional shares in the market to get the approval.

“But, from a long-term perspective, Korean Air will benefit from the acquisition of its rival,” he said.

Korean Air’s bid to acquire Asiana Airlines gained much attention as it was the first major deal announced at the peak of the COVID-19 pandemic when the entire aviation industry was reeling from business uncertainties.

With the planned merger, Korean Air, the 18th-largest airline by fleet, is expected to rise to No. 10 globally, with its business synergy worth an estimated 300 billion to 400 billion won.

By Shim Woo-hyun(ws@heraldcorp.com)