State-arranged marriage of Korean Air Lines and Asiana Airlines to create a monopoly in full-services air transport could flop like the deal to create world’s largest shipbuilder in the face of growing protectionism on global trade order.

The Korean Air-Asiana merger requires endorsement from antitrust regulators of the U.S., the European Union, China, Japan, the U.K. and Australia. An approval is essential from four primary markets of U.S., the EU, China and Japan. If any one of them opposes, the M&A goes down the drain.

China, the U.S. and the EU are the biggest worry.

China currently focuses on the possibility of limiting competition on five routes Chinese national flag carriers are servicing with a combined market share of above 65 percent – from Seoul to Zhangjiajie (100 percent), Xian (96.3 percent) and Shenzhen (65.3 percent), and from Busan to Qingdao (100 percent) and Beijing (66.5 percent).

“The company has submitted documents over 10 times to the Chinese antitrust agency to actively respond to its review since the filing of the application in January 2021,” said a Korean Air official.

The EU also is asking stricter corrective measures than usual, saying approval would be possible when Korea’s two biggest airlines distribute some of their air routes or landing slots to other carriers to address antitrust issues immediately.

In April last year, Canada’s top airline Air Canada called off its $190 million M&A deal with third-largest Transat AT due to European regulators’ warning to disapprove the plan. Spain’s No. 1 aviation group IAG also cancelled its takeover of third-largest Air Europa after European regulators indicated they would veto the deal.

Early this year, Korea Development Bank-led merger between Hyundai Heavy Industries and Daewoo Shipbuilding & Marine Engineering flopped in the face of opposition from European Commission.

A blessing from the U.S. also won’t be easy.

The U.S. has also started applying stricter criteria due to five routes from Seoul to New York, Los Angeles, Seattle, San Francisco and Honolulu. The U.S. Department of Justice in March changed its stance on the Korean Air-Asiana union, indicating stricter and more complicated reviews. The country’s No. 2 United Airlines reportedly filed a complaint against the tie-up in fear of a hit on its services between Asia and the U.S. from Asiana’s exit from the alliance.

The Fair Trade Commission is shifting to European-like M&A process by reviewing areas of anti-competition first and then moving on to demand remedial action for conditional approval.

In case of mega M&As requiring international approval, governmental assistance is essential, said experts.

By Baek Sang-kyung and Lee Ha-yeon

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]