April 28, 2024

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Korean Air and Asiana Airlines' aircrafts at Incheon International Airport (Yonhap)

The European Union's antitrust regulator granted conditional approval for the merger of Korean Air with its smaller domestic rival Asiana Airlines on Tuesday, leaving only approval from the US pending among the 14 relevant authorities, according to Korean Air.

The approval comes after the nation’s largest air carrier submitted a revised merger plan to the European Commission in November last year, which entails selling off Asiana Airlines' cargo business and turning over certain airport slots for four European city routes: Frankfurt in Germany, Paris, Rome and Barcelona, Spain.

Korean Air and Asiana Airlines must undertake various measures to fulfill their commitments related to the cargo segment. These steps include engaging an advisory firm to supervise the divestment of Asiana Airlines’ cargo freighter business, commencing the bidding process and identifying a final purchaser for the cargo business. Approval from the European Commission for the chosen buyer is necessary to finalize the airlines' merger agreement.

For the approval of the US antitrust regulatory body, the industry holds a relatively positive outlook in general. But US authorities may still demand several more revisions to the submitted plan, considering the substantial occupation of routes between Korea and the US currently held by the two airlines.

According to the aviation industry reports, Korean Air, Asiana Airlines and Delta Air Lines collectively occupied over 80 percent of US routes at Incheon Airport last year. Korea's Fair Trade Commission considers Korean Air and Delta Air Lines as a single combined operator when assessing antitrust concerns due to their joint operation of routes between the two countries, following the establishment of a joint venture in 2018.

As reported by a US-based media outlet in May last year, the US Department of Justice was considering a suit to thwart Korean Air's acquisition, citing competition restrictions concerns for both passenger and cargo traffic. United Airlines, which previously had a joint operation with Asiana Airlines, is reportedly opposing the merger due to concerns on competitiveness issues on the routes.

Potentially resolving the matter through additional plans to sell off partial slots is not an unfamiliar prospect for Korean Air. Japan, the United Kingdom and China had also requested corrective measures due to monopoly concerns before granting their approvals.

Korean Air submitted plans to divest seven slots bound for Japan and eight slots to China, to be transferred to low-cost airlines, provided they are willing to operate them. Seven slots per week at London Heathrow Airport are designated to be allocated to Virgin Atlantic in the UK.

Once approval from US authorities is obtained, Korean Air aims to sell off Asiana Airlines' cargo business itself, with some critical tasks remaining to be addressed.

"As the US approval is expected to finalize by the end of this year, we anticipate the fresh operation of a fully integrated airline by 2027, after a two-year integration process," a Korean Air official told The Korea Herald on Tuesday.

The official further emphasized that minimizing inconvenience to passengers is another critical issue the airline is preparing to resolve seamlessly, including the transfer of various services, such as existing airline mileage points.

By Kim Hae-yeon (hykim@heraldcorp.com)