Korean Air-Asiana Merger Green Lit By Japanese Authorities

Japan’s competition regulator has granted its approval for the Korean Air-Asiana Airlines merger after a three-year process. The deal is awaiting the green light from two remaining competition regulators in the European Union and the US.

Japan approves Korean-Asiana merger

The Japan Fair Trade Commission (JFTC) cleared the proposed merger under the condition that the airline give up slots on certain routes between South Korea and Japan. The competition watchdog highlighted seven routes – Seoul to Osaka, Sapporo, Nagoya, and Fukuoka, and Busan to Osaka, Sapporo, and Fukuoka – it would have to concede “a limited number of slots” to other airlines.

Korean Air said in a statement,

“The JFTC requested for Korean Air to submit remedies on select routes between Korea and Japan where the combined market share of Korean Air, Asiana Airlines and its respective subsidiaries (Jin Air, Air Busan and Air Seoul) would limit competition.”

This means the merger has the approval of 12 of the 14 competition authorities it needs, with only the EU and US remaining. A decision from Europe is expected by next month at the latest, while in the US, the situation is a little more complicated.

Japan’s decision is the first approval received in more than nine months. The last authority to give the green light was the UK back in March 2023, but the deal would take a blow after the US Department of Justice (DOJ) blocked the merger in May.

Cargo divestiture

The JFTC was concerned about competition on cargo routes between Japan and South Korea. However, following KAL’s decision to divest Asiana’s cargo division, the competition body was satisfied with a cargo block space agreement (BSA) on select routes from Japan to Korea.

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Four routes to Europe and its cargo unit are expected to be sold, paving the way for the European Unions antitrust approval.

This was also a key concession for European authorities, which demanded the new airline give up slots in Barcelona, Frankfurt, Paris CDG and Rome Fiumicino. There are reportedly several airlines, including Air Premia, Air Incheon and Jeju Air, interested in acquiring the cargo business.

US concerns remain

In a New Year’s message to employees, Korean Air Chairman and CEO Cho Won-tae said the airline hopes to “complete the acquisition of Asiana Airlines in 2024” following positive talks with the European Commission (EC). The EC has now set a deadline of February 14, 2024, for a decision on the merger, with all signs pointing to a favorable outcome for the two airlines.

Korean Air said,

“We expect Japan’s approval will positively influence the decisions of the US and EU authorities.”

However, the merger will face stiffer scrutiny in the US, which still has major competition concerns. In May 2023, the US Department of Justice (DOJ) blocked the deal and is likely to make significant demands if it grants its approval. This includes leasing widebody capacity to Air Premia, the Korean low-cost carrier eyeing up an expansion into the US.

Do you think the Korean Air and Asiana Airlines merger will go through this year? Let us know your insights in the comments.