EU prolongs review of Korean Air-Asiana merger, requires more concessions
| Hanjin Group Chairman Cho Won-tae / Courtesy of Korean Air |
By Kim Hyun-bin
An unprecedented move by the European Union (EU) to conduct a second-stage review of Korean Air’s takeover of Asiana Airlines will lead to a further delay in the ongoing process, according to industry officials, Monday.
The European Commission said the deal could affect passenger and air cargo transport services between the European Economic Area (EEA) and Korea, because the two airlines are strong and close competitors, adding that it needs more time to assess the effects of the takeover.
“The transaction could?reduce competition?in the provision of?passenger transport?services on?four routes?between South Korea and the EEA. On those routes, Korean Air and Asiana compete head-to-head, and in two of those routes, they are the only two companies offering direct services. Other airlines may be unlikely to exert sufficient competitive pressure on the merged entity,” the commission said in a statement.
As of 2019, Korean Air and Asiana Airlines’ market share is 100 percent in Barcelona, 75 percent in Rome, 68 percent in Frankfurt and 60 percent in Paris. As a result, Korean Air is expected to submit measures to ease its monopoly, including returning some route slots.
Specific figures have not been disclosed, but the combination of the two companies could reduce the share of European routes to 50 percent. Korean Air is said to be discussing new flights with domestic low-cost carriers (LCCs) as well as foreign airlines. Air Premia (Paris) and T’way Air (Rome) are hoping to secure routes to Europe.
However, since the second-stage review takes up to 125 days, the takeover will inevitably be delayed with U.S., UK and Japan screenings still pending. The European Commission said it plans to announce its review results on July 5.
“The second stage review is common in takeovers between large companies, so we are working hard to complete the business combination review as soon as possible,” Korean Air said. “Since it was mentioned from the beginning of the review that there are concerns about restricting competition, additional issues will be discussed with the competition authorities.”
On Jan. 13, the EU judged that it would be difficult to resolve monopoly concerns over Korean and European routes with only the report submitted by Korean Air. Korean Air was unable to submit a corrective plan after the first screening.
“Since the EU has decided to proceed with the second-stage review, it is not necessary to submit a corrective plan in the first-stage review process,” an official from Korean Air said.
