Fair Trade Commission Grants Conditional Approval for Korean Air-Asiana Merger... Adjustment of 26 International Routes

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[Asia Economy Sejong=Reporter Dongwoo Lee] The Korea Fair Trade Commission (KFTC) has conditionally approved the corporate merger between Korean Air and Asiana Airlines. The KFTC determined that the merger would restrict competition on 26 international passenger routes and ordered the transfer of slots and traffic rights on these routes. The implementation period is 10 years. The obligation to implement corrective measures begins on the day all foreign reviews are completed and Korean Air completes the acquisition of Asiana’s shares.

On the 22nd, the KFTC announced that it decided to conditionally approve the corporate merger in which Korean Air acquires 63.88% of Asiana Airlines’ shares. The core of this merger is that, due to concerns about competition restrictions on 26 overlapping international routes and 14 domestic routes, slots and traffic rights must be returned to new airlines.

Among the 26 overlapping international routes deemed to restrict competition, 15 are "open skies routes" that can operate without traffic rights, and 11 are "non-open skies routes" that require traffic rights.

The open skies routes include Seoul (Incheon·Gimpo) to New York, Los Angeles (LA), Seattle, Honolulu, San Francisco, Barcelona, Phnom Penh, Palau, Phuket, and Guam; and Busan to Qingdao, Da Nang, Cebu, Nagoya, and Guam. The non-open skies routes include Frankfurt, London, Paris, Rome, Istanbul, Zhangjiajie, Xi’an, Shenzhen, Busan-Beijing, Sydney, and Jakarta. For these 26 routes, slots and traffic rights must be transferred to new airlines upon request for 10 years from the date of the merger.

Regarding domestic routes (one-way basis), the KFTC found competition restrictions on 14 of 22 overlapping routes after integration. Specifically, for (Jeju?Inland) routes: Jeju?Gimpo, Cheongju, Busan, Gwangju, Jinju, Yeosu, Ulsan, Daegu; and for (Inland?Inland) routes: Seoul (Gimpo)?Busan, Ulsan, Yeosu. Among these, for eight routes in both directions, including Cheongju?Jeju, Gimpo?Jeju, Gwangju?Jeju, and Busan?Jeju, slots must also be transferred to new airlines.

The KFTC imposed fare increase restrictions and prohibitions on seat supply reductions concurrently for each route subject to corrective measures, considering that structural measures such as slot and traffic rights transfers require a certain amount of time to be implemented.

The upper limit on the number of slots to be returned is determined per route. The specific calculation criteria include the number of slots that can reduce the increased number of passengers due to the merger if one company’s share exceeds 50%, and the number of slots that can reduce the combined share to 50% or less if both companies’ shares are below 50%.

The detailed procedures for slot return and transfer, the actual number and timing of slots to be transferred, and the airlines to which slots will be transferred will be decided by the KFTC in consultation with the Ministry of Land, Infrastructure and Transport at the time of the new airline’s entry application.

Prohibition of Refusal When New Airlines Request Airport Slots, etc.

The KFTC prohibits refusal without special reasons when new entrant airlines request slot transfers or sales. The merged airline must cooperate with behavioral measures such as transferring or selling foreign airport slots, concluding fare coordination agreements, cooperating in the use of various domestic airport facilities, and acquiring overflight rights.

The implementation period for corrective measures lasts until structural measures are completed. Once structural measures for each route are fully implemented and new airlines have entered, the obligation to implement behavioral measures for each route ends. However, for six domestic routes with insufficient demand classified as remote routes, the same behavioral measures will be imposed for 10 years. These six domestic routes are Jeju?Ulsan, Jeju?Jinju, and Jeju?Yeosu, each in both directions.

Additionally, the KFTC judged that there are no competition restrictions on domestic and international cargo routes and other aviation maintenance markets.

The KFTC explained that since the filing in January last year, it has undergone a review process including forming a dedicated review team for over a year, conducting economic analyses in passenger and cargo sectors, consulting with foreign competition authorities, reviewing competition restrictions by route, and preparing corrective measures.

In particular, considering the need for the aviation authority’s role for effective implementation of these corrective measures, the KFTC signed an MOU with the Ministry of Land, Infrastructure and Transport last October and has held several working-level consultations.

The KFTC stated, "Structural measures imposed on routes with competition restrictions will only be effective if new competing airlines enter those routes. Going forward, the KFTC will make every effort to ensure the effective implementation of corrective measures in cooperation with aviation authorities and the implementation supervision committee."

This content was produced with the assistance of AI translation services.