"Over the Big Mountain, But"…Korean Air Returns Prime Routes (Comprehensive)

Mega Carrier Launch Signals Major Shift in Aviation Industry
LCCs Also Challenge Long-Haul Routes

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Hyun-seok] The Fair Trade Commission (FTC) has mandated that when new airlines enter or existing airlines increase flights on 26 international routes and 8 domestic routes, the two companies must compulsorily return their slots at domestic airports (Incheon, Gimhae, Jeju, Gimpo Airports) to the airport authorities.

The Fair Trade Commission conditionally approved the corporate merger between Korean Air and Asiana Airlines. For Korean Air, this marks a significant milestone in the merger process. However, the approval comes with conditions requiring the transfer of slots (the number of aircraft takeoffs and landings allowed per hour) and traffic rights (government-allocated operating rights to airlines) on certain routes such as New York, Paris, and Jeju to other airlines, and restrictions on fare increases.

On the 22nd, the FTC announced that it had conditionally approved Korean Air's acquisition of 63.88% of Asiana Airlines' shares.

The FTC judged that among the overlapping routes held by both companies, competition concerns are significant on 26 of 65 international routes and 14 of 22 domestic routes.

Among these, for the 26 international routes and 8 domestic routes, if new airlines enter or existing airlines increase flights, the companies are required to compulsorily return their slots at domestic airports (Incheon, Gimhae, Jeju, Gimpo Airports) to the airport authorities. The international routes include Seoul?New York, Los Angeles, Seattle, Honolulu, San Francisco, Barcelona, Phnom Penh, Palau, Phuket, Guam, and Busan?Qingdao, Da Nang, Cebu, Nagoya, Guam. The domestic routes (one-way basis) include Jeju?Cheongju, Gimpo, Gwangju, and Busan.

Additionally, for 11 non-liberalized routes requiring traffic rights, when new airlines enter or existing airlines increase flights, the companies must also return the traffic rights they currently use. These routes include Seoul?London, Paris, Frankfurt, Rome, Istanbul, Zhangjiajie, Xi'an, Shenzhen, Jakarta, Sydney, and Busan?Beijing.

Considering that structural measures require a certain amount of time to be implemented, the FTC also imposed concurrent restrictions on fare increases and prohibitions on seat supply reductions for each affected route.

Korean Air stated, "We accept the FTC's decision and will do our best to obtain approval from overseas competition authorities for the corporate merger review."

However, there are concerns that the FTC's decision could weaken synergies for the integrated airline. An industry insider said, "The integrated airline needs to create synergies based on the networks of both companies," adding, "The FTC's decision inevitably diminishes the economies of scale effect."

Another official emphasized, "The airline industry is greatly affected by variables, so timely responses are necessary," and added, "The 10-year period and the existence of the implementation monitoring committee may reduce the airline's management autonomy and weaken integration synergies."

Low-Cost Carriers (LCCs) are expected to gain indirect benefits from the FTC's decision. Korean Air must transfer airport slots on liberalized routes such as Seoul?New York and Los Angeles, and slots and traffic rights on non-liberalized routes such as Seoul?London and Paris to new entrant airlines. Additionally, the integrated airline must return airport slots on domestic routes. This increases opportunities for LCCs to enter the market.

However, some express regret over parts of the FTC's decision. An industry insider said, "Grouping Gimpo and Incheon as the same departure point is disappointing from an LCC perspective because the market characteristics and demand differ by departure location," and added, "Entry barriers remain high for Chinese routes that require securing traffic rights." They further noted, "In short-haul routes, the integrated airline's monopoly will intensify, while in long-haul routes, the market may be ceded to foreign airlines."

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