[Photo by Han Joo-hyung]
Korean Air Lines may not be able to receive a full blessing on its planned marriage with smaller full-service carrier Asiana Airlines even as it had been state arranged due to concerns over air monopoly, which is expected to delay the liftoff of an integrated airliner to beyond 2023.
The chief of Fair Trade Commission (FTC) during parliamentary questioning on Wednesday vowed to complete review of the M&A within the year, but a green light won’t likely come to meet original timeline of 2023.
The acquisition would become complete when Korean Air buys new shares issued by Asiana Airlines to raise its stake to 37.08 percent, or up to 51.9 percent when counting in its earlier acquired bonds later convertible to Asiana shares.
The last rights offering scheme would be possible upon state approval of the M&A. Of 15 countries where the two carriers service and require merger endorsement, only five have approved of the integration.
FTC’s review also could be conditional to address to monopolistic concerns.
Of total 435 routes serviced from Korean air gateways, 50.8 percent or 221 would be monopolized by the single full-service carrier in Korea, according to the report for the 2021 National Assembly audit published by the ruling Democratic Party lawmaker Park Sang-hyuk on Wednesday.
More than half of the yearly passengers traveling on the 221 routes in 2019 used Korean Air Lines, Asiana Airlines and their LCC subsidiaries Jin Air, Air Busan and Air Seoul.
Most of the destinations were nearby Japan, China and Southeast Asia. For short-haul rides, optional flights are not available.
For the route between Gimpo, Korea and Tokyo, Japan, 54.97 percent out of the 2,041,000 travelers chose Korean Air and Asiana, and the rest of 45.03 percent LCCs and foreign names.
On the route between Incheon, Korea to Xian, China, the two airlines flew 96.59 percent of the total, on the Incheon-Phuket route 90.68 percent, the Incheon-Jakarta route 71.90 percent and the Gimpo-Kansai route 67.56 percent.
Korean Air Lines say it has secured only 38.5 percent of the total landing slots at Incheon International Airports, but monopoly issue could rise considering the number of passengers traveling on their flights.
The FTC reviewing Korean Air’s acquisition reportedly evaluates the restriction on market competition based on the share of passengers.
As for the landing slot, Korean Air, Asiana Airlines and affiliated LCCs dominated nearly 50 percent of the total during the daytime, a mere 4.13 percent from midnight to 6 a.m. and 49-57 percent throughout the other hours.
Freight service also is found to have a risk of monopoly as they dealt with a combined 61.54 percent of total freights carried in Korea as of 2019.
Due to the monopoly risk, the antitrust agency is discussing the issue with the Ministry of Land, Infrastructure and Transport.
But if the government cancels some of the flight licenses or distribute Asiana’s to LCCs, Korean Air Lines may not be able to keep its promise of keeping routes and flight terms as well as payroll unchanged at both airliners after merger.
Korean Air Lines shares plunged 6.12 percent to trade at 31,450 won in Seoul trading at 1:45 p.m. Wednesday. Asiana Airlines lost 8.46 percent to 24,350 won.
By Yoon Won-sup and Lee Ha-yeon
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]