Korea’s FTC orders streamlining in KAL-Asiana routes in return for M&A approval

2022.02.22 15:50:37

[Photo by MK DB]이미지 확대

[Photo by MK DB]

South Korea`s antitrust watchdog granted the mega-merger of Korean Air Lines and Asiana Airlines to create a monopoly in full-service air transport on the condition of surrender in some of their overlapping slots and flight license over the next 10 years to ensure fair competition.

The Korean Fair Trade Commission (KFTC) on Tuesday okayed the 1.8 trillion won ($1.5 billion) marriage through Korean Air Lines’ purchase of 63.88 percent stake in smaller debt-ridden Asiana Airlines in return for “structural” streamlining by sharing some of their slots and flight permits with other players.

While streamlining pans out, the airliners must not raise fares or reduces seats in their routes as the antitrust agency found 26 out of their overlapping international routes and 14 out of their overlapping domestic routes can undermine fair competition, according to its press release.

The decision will be finally adjusted after antitrust regulators in six major countries.

The case makes the first FTC review of an integration of full-service carriers resulting in the order for a structural change.

Under state-led arrangement, Korean Air Lines in November last year signed an agreement to take over 63.88 percent in cash-strapped full-service rival Asiana Airlines and filed the M&A with the FTC in January.

The marriage has gained approval from eight countries and are under review by six major jurisdictions – the U.S., U.K Australia, EU, Japan, and China.

The routes the FTC found in danger of undermining competition in international flights are all five overlapping routes to U.S. cities and all six routes to European cities, five out 18 in Chinese cities, one to Nagoya on Japanese route, six on 19 Southeast Asian routes and three others to Sydney and Guam.

The two airlines were also requested not to change their mileage systems to make them more disadvantageous to customers than those implemented in the pre-pandemic year of 2019.

Shares of Korean Air Lines ended Tuesday 1 percent lower at 29,750 won and Asiana 3.8 percent down at 20,100 won.

By Minu Kim

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