EU Grants Conditional Approval for Korean Air and Asiana Merger... Only the US Remains Among 14 Countries

The corporate merger review between Korean Air and Asiana Airlines has passed the threshold of the European Union (EU) competition authorities, leaving only the approval from the United States to complete the final merger.

The European Commission (EC) approved the corporate merger of Korean Air and Asiana Airlines on the 13th (local time). Previously, Korean Air initiated the preliminary consultation process with the EC in January 2021 and submitted the formal notification in January last year.

Subsequently, on November 2nd last year, Korean Air submitted remedial measures to the EC to alleviate concerns about competition restrictions in the passenger and cargo businesses. After gathering stakeholders’ opinions and conducting market evaluations, the approval was granted.

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However, the EC’s decision is a 'conditional approval' based on the implementation of the remedial measures. The conditions include the sale of Asiana Airlines’ cargo business and the transfer of certain European passenger routes.

Korean Air will receive final approval from the EU once it completes all pre-sale procedures, including bidding and selecting buyers for the separated sale of Asiana Airlines’ cargo business.

The aviation industry expects Korean Air to complete preparations for the sale by October at the latest.

The actual sale will take place after the EC’s final approval.

Currently, the main candidates for acquiring the cargo business are four domestic low-cost carriers (LCCs): Jeju Air, Eastar Jet, Air Premia, and Air Incheon. Following the EC’s approval, the formal sale process is expected to begin this month.

Regarding the passenger business, T’way Air, designated as a new entrant airline, is scheduled to gradually enter four European routes?Incheon to Paris, Rome, Barcelona, and Frankfurt?from the second half of this year.

These routes were identified by the EC as having competition concerns due to the merger of the two airlines.

Korean Air will later return part of the traffic rights for these four routes to the Ministry of Land, Infrastructure and Transport (MOLIT), which will redistribute them.

Slot transfers (airport takeoff and landing frequencies) will also be conducted through consultations between airlines.

With the EC’s conditional approval on this day, only the approval from U.S. competition authorities remains for the corporate merger of Korean Air and Asiana Airlines. Korean Air has already obtained approvals from 13 of the 14 'mandatory notification countries' where the merger was reported in January 2021, except for the United States.

Korean Air plans to focus on consultations with U.S. competition authorities and aims to complete the merger review process as soon as possible.

Previously, 13 countries including T?rkiye (February 2021), Taiwan, Thailand, and the Philippines (May 2021), Malaysia (September 2021), Vietnam (November 2021), South Korea and Singapore (February 2022), Australia (September 2022), China (December 2022), the United Kingdom (March 2023), Japan (January 2024), and the EU (February 2024) have either approved the merger or completed reviews due to not being subject to review.

Once Korean Air and Asiana Airlines merge, their passenger business is expected to rank within the top 15 globally, and their cargo business within the top 10. Even after selling Asiana Airlines’ cargo business, their position in the air cargo sector is expected to grow.

As of last year, the combined revenue of the two airlines reached the 20 trillion KRW range.

The integration of the two airlines is expected to generate synergy not only through external growth such as increased passenger market share and revenue but also by enhancing profitability and efficiency in various international routes, maintenance, and training.

Even with U.S. competition authorities’ approval, it is expected to take about two years for the actual integration of Korean Air and Asiana Airlines. Until then, the two airlines will operate independently, after which the 'Integrated Korean Air' will be launched.

Simultaneously, the integration process of three LCCs?Jin Air, a subsidiary of Korean Air, and Air Busan and Air Seoul, subsidiaries of Asiana Airlines?is also expected to proceed.

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