Korean Air Races To Secure Regulatory Approval For Asiana Merger

Korean Air Races To Secure Regulatory Approval For Asiana Merger

May 23, 2022 Off By Reem

“Korean Air has made every effort to get approval for the merger in other countries,” the largest air carrier in Korea said. “Each country’s review is underway without any setbacks.”

Korean Air has revealed the frenzy of activities it has initiated with antitrust regulatory bodies in order to clear  the $1.5 billion buy-out of domestic rival Asiana Airline.

The airline announcement comes after a South Korea’s Fair Trade Commission conditional approval was issued in February 2022, while proceedings with the US, China, the EU are still ongoing.

While securing approval from the United Kingdom and Australia will have no influence on the outcome of the 2020’s merger deal, the airline which has already concluded filing proceedings with Japan, Australia and the UK is expecting major decisions from the United States, the European Union, China.

China

While Chinese authorities have requested supplementary data be handed over by Korean Air ten times since the january 2021 initial filing, this may not necessarily prove a challenge. Even after China’s failure to issue a decision before an October 2021 deadline forced Korean Air to re-apply for the merger approval.

The US  

In the United States, a lawsuit filed by United Airlines, the country’s second largest airline, has unexpectedly brought elevated attention to the case within the Department Of Justice. United Airlines, a member of the Star Alliance together with Asiana Airlines has expressed fears that the deal would compromise the alliance’s ability to compete on that market particularly against Delta Airline the US largest carrier aided by Korean Air both joining forces as part of the SkyTeam alliance.

Faced with an increasing number of documents requests from US regulators willing to better evaluate the merger deal, Korean Air has admitted it needs more time to comply with those requests.

The European Union

The European Union stance on the Korean Air and Asiana Airline merger deal seems now more difficult to foretell after a recent merger attempt of Korea’s Hyundai Heavy Industries Co. and Daewoo Shipbuilding and Marine Engineering Co, the world’s two largest shipbuilding companies was rejected by the Union.

While Korean Air proudly celebrates having already secured approval from Turkey, Taiwan, Thailand and Vietnam, the airline says it is involved in an effort that has already cost about 35 billion won ($27.6 million) as of March 2022 in consulting and advisory fees provided by three global law firms and eight local law firms along with  three economic research firms and two political advisory firms. Showing its determination to win over skeptics, the airline has constituted five teams of about one hundred experts targeting each country.

Yet at the heart of the deal, a variety of concerns have been brought forward by South Korea’s own Fair Trade Commission which observed that of the 87 routes where both Asiana and Korean Air operate, the merger is likel to hurt competition on twenty six international and fourteen domestic routes. The FTC further states that ideally, the airline would have to forfeit a number of slots says slots on its most heavily serviced routes from Seoul to New York, Paris, London, Phuket and Guam.

In the rush to secure approval in the shortest time span possible, Korean Air executives have began documenting the voluntary remedial actions the airline may undertake in an effort to convince regulators. One such action has been to invite rival airlines

Going further, Korean Air executives are said to have even goaded competitors to increase traffic on the most heavily serviced routes in an effort to maintain service offerings from other carriers at the same level.

Despite Korean Air all-out effort to have the deal cleared, fundamental doubts linger after Asiana Airlines has posted four profitable quarters consecutively.

Fundamentally Asiana Airline turning a profit for the fourth quarter straight, and obvious unease to explain its merger strategy synergy combining 2 full service airlines relatively smaller population makes it economically unviable for two full service airline to co-exist as it is ideal to have 100 million people with half of the passenger demand and GDP driven by the domestic market.