RM6.7 billion Korean Air-Asiana Airlines merger gets European Commission nod, next US approval to complete it

KUALA LUMPUR: Korean Air Lines Co Ltd is one step closer in its US$1.4 billion (RM6.7 billion) bid to merge with rival Asiana Airlines Inc after the carrier received the nod from the European Commission (EC) on Feb 13. 

The EC said the approval comes with certain conditions proposed by Korean Air.

This includes the divestment of Asiana Airlines’ global cargo freighter business and giving four routes to South Korea’s budget carrier T’way Air Co Ltd from the second half of 2024. 

The routes include Seoul Incheon-Paris, Seoul Incheon-Rome, Seoul Incheon-Barcelona and Seoul Incheon-Frankfurt.

“The commission therefore concluded that the transaction, as modified by the commitments, would no longer raise competition concerns. The decision is conditional upon full compliance with these commitments.”

“Under supervision of the commission, an independent trustee will monitor their implementation,” the EC said in a statement.

The EC was notified on the planned merger on Jan 13, 2023 and it had issued a Statement of Objections to Korean Air on May 17, 2023 due to preliminary competition concerns. 

The commission said based on its market research, the merger would harm competition in the air cargo market between South Korea and Europe and passenger air transport services on routes between South Korea and certain European destinations namely Paris, Rome, Barcelona and Frankfurt. 

The EC said the objection was initially made due to the likelihood of price hike or decreased quality for passengers and cargo customers between South Korea and European Economic Area (EEA).

The EC’s executive vice president in charge of competition policy Margrethe Vestager said the merger had raised significant competition concerns in cargo and passenger air transport services.

“However, Korean Air committed to the divestment of Asiana Airlines’ global cargo freighter business to a suitable purchaser, and to the divestment of assets to facilitate the entry of rival airline T’way Air on key passenger routes.”

“These remedies effectively address our concerns and will ensure fair competition and consumer choice in this vital sector,” she said in a statement. 

Korean Air said it had successfully obtained approval with 13 of the 14 regulatory authorities on its bid to take over Asiana Airlines. 

The airline had filed merger notifications to a total of 14 competition authorities globally since Jan 2021. 

The authorities that had approved the bid include Türkiye, Taiwan, Thailand, the Philippines, Malaysia, Vietnam, South Korea, Singapore, Australia, China, United Kingdom, Japan and most recently the European Union. 

The South Korea’s flag carrier is currently focusing on its discussions with the US competition authority to finalise the overall merger review processes as soon as possible. 

For the planned cargo divestment, Korean Air said it will need to appoint an advisory firm to oversee the sale of Asiana Airlines’ cargo arm, initiate the bidding process and select a buyer of the cargo business. 

“The approval by the EC of the selected buyer is required to close the airlines’ merger deal. Once Korean Air completes the acquisition of Asiana Airlines, the actual cargo divestment process will take place,” the airline said. 

The carrier added that it will also provide full support to T’way Air for the latter to gradually start operating the four European routes. 

The EC said Korean Air would hand over its slots and traffic rights as well as the required aircraft to T’way Air for it to fly to the four destinations. 

Both Korean Air and Asiana Airlines are full service carriers based in Seoul, South Korea. Asiana Airlines is a member of Star Alliance while Korean Air is a member of SkyTeam alliance.