EU again postpones Korean Air, Asiana Airlines merger review

Korean Air Lines Co. and Asiana Airlines Inc. planes are parked at Incheon International Airport, South Korea. [Photo by Yonhap]

The European Commission (EC) has pushed back its decision on whether to approve the proposed merger of Korean Air Lines Co., South Korea’s national flag carrier, and smaller local rival Asiana Airlines Inc. by more than two months, raising concerns that there could be a possibility that the consolidation of the two airlines will be delayed or collapse.

The regulator was originally scheduled to make the decision in early August. Concerns are rising that Korean Air and the EC may have been unable to find a solution to the anticipated monopolistic issues after the merger. The U.S. Department of Justice is also said to hold a negative view of the merger, suggesting that the conclusion of the merger approval may be delayed to next year.

The EC announced the change in the merger review schedule on its website on Wednesday.

Last month, the EC issued a Statement of Objections (SO) to Korean Air, expressing concerns that the merger “may reduce competition in passenger and cargo transportation on four routes between Korea and France, Germany, Italy and Spain.”

In response, Korean Air was due to submit a document outlining measures to address the potential issue of monopoly by June 23 and the EC was scheduled to announce its decision on approval by Aug. 3 after reviewing it. However, Korean Air requested an extension of the deadline, which the EC granted, pushing back the date of the decision.

The industry is now expecting a decision in October. “We have been in discussions with EC to extend the review deadline in order to finalize our corrective action plan,” said a Korean Air official. “We will do our best to complete our discussions with EC smoothly within the extension period and secure final approval.”

Currently, Korean Air and Asiana Airlines operate a significantly higher number of flights on the Korea-Europe routes compared with European airlines. For example, on the Paris route, Korean Air operates seven flights per week, Asiana Airlines operates six flights per week and Air France operates seven flights per week.

Even if Korean Air were to return some of its transportation rights after the merger, it would not be easy to narrow the gap. European airlines are not proactive in increasing the number of flights to Korea due to profitability reasons. This means that it will be necessary to find a third national flag airline with competitiveness on the European routes.

However, there are only two low-cost carriers (LCCs) that can fly to Europe, Air Premia Inc. and T’way Air Co. While Korean Air is reportedly considering lending some of its aircraft to these LCCs to create a competitive system on European routes, EC is known to have said that that is not enough. An industry insider stated, “The EU’s decision to extend the deadline does not necessarily mean a negative outcome. If they had decided to rejected the merger, they would not have granted an extension, so this should be seen as giving Korean Air time to come up with remedial measures.”

Korean Air officially announced its plan to acquire Asiana Airlines in November 2020 and filed merger notifications with competition authorities in 14 countries, including the EC, in January of the following year. Only three approvals from the European Union, the U.S. and Japan are pending.

Japanese authorities are expected to issue a decision next month. In the case of the U.S., if the Department of Justice files a lawsuit for possible antitrust violations, it could halt the merger, as its approval process is different from that of other countries. With the recent negative sentiments in the European Union and the U.S., some observers believe that the merger will not be finalized until next year.