Fair Trade Commission "Korean Air and Asiana M&A Dedicated Team Formed... Reviewing as Quickly as Possible"

As the court's decision on Korean Air's acquisition of Asiana Airlines approaches, on the 30th, Korean Air and Asiana Airlines passenger planes are moving toward the runway at Gimpo Airport apron in Gangseo-gu, Seoul. The Seoul Central District Court is expected to deliver a ruling today or tomorrow on the injunction request filed by activist private equity fund KCGI against Hanjin KAL to prohibit the issuance of new shares. If the court dismisses the injunction request, the acquisition process will accelerate, but if the injunction is granted, the acquisition is likely to be canceled. Photo by Kim Hyun-min kimhyun81@

[Sejong=Asia Economy Reporter Kwon Haeyoung] The Fair Trade Commission (FTC) has formed a dedicated team of six members to review the merger and acquisition (M&A) approval of Korean Air and Asiana Airlines. The commission plans to conduct the review as swiftly as possible. Attention is focused on whether the FTC, which is currently reviewing the corporate merger case, will grant conditional approval for the M&A between the two companies.

On the 22nd, Jung Jin-wook, Director of the Corporate Group Division at the FTC, stated after announcing the '2021 Work Plan,' "We have formed a dedicated team within the relevant departments to review the M&A approval of Korean Air and Asiana Airlines," adding, "Six people are assigned to this case: two from the Corporate Merger Division, two from the Economic Analysis Division, and two external experts."

He explained, "In-depth economic analysis and research services from related scholars are necessary," and added, "At this stage, it is difficult to specify a deadline for the approval review." He further stated, "We will conduct a thorough review to ensure that the process is as swift as possible while not restricting competition in the relevant market or causing harm to consumers."

Korean Air submitted a corporate merger notification related to the acquisition of Asiana Airlines' shares to the FTC on the 14th. To complete the merger of the two companies, they must pass the final hurdle of the FTC's corporate merger review. According to the Monopoly Regulation and Fair Trade Act, M&As where the acquiring party's total assets or sales in the previous fiscal year exceed 300 billion KRW must undergo FTC review to ensure that the merger does not restrict market competition.

At the end of 2019, Korean Air and Asiana Airlines held domestic market shares of 22.9% and 19.3%, respectively. Including Korean Air's low-cost carrier (LCC) subsidiary Jin Air and Asiana Airlines' Air Busan and Air Seoul, the combined market share rises to 62.5%.

Korean Air is expected to argue for an exemption from the corporate merger review. Exemptions can be granted if the merger significantly improves efficiency or if the acquiring company's rehabilitation is deemed difficult. Previously, the M&A review between Jeju Air and Eastar Jet was granted an exemption due to the impossibility of rehabilitation. However, the issue with such cases is that the FTC cannot impose corrective measures. Given the government's decision to restructure the aviation industry, there is speculation that the FTC is likely to grant 'conditional approval' by imposing corrective measures such as price restrictions.