Delayed Review of Korean Air and Asiana Merger... Key Issue is Easing Competition Restrictions

Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Dongwoo Lee] The integration process of Korean Air and Asiana Airlines is being delayed due to the Fair Trade Commission's (FTC) prolonged corporate merger review, with concerns over whether the merger will restrict competition emerging as a key issue. Analysts suggest that if the FTC determines there is a high risk of competition restriction on overlapping routes between the two companies, the integration process could be further delayed.

According to the aviation industry on the 26th, the results of the economic analysis research on the Korean Air-Asiana Airlines merger are expected next month but may be delayed further. Earlier, the FTC extended the research contract from early June to the end of next month.

According to the "Explanation on the Prolonged Review of the Korean Air-Asiana Merger" released by Rep. Kwanseok Yoon of the Democratic Party on the same day, the FTC noted that major foreign competition authorities have not yet made significant progress in their reviews, and there are practical concerns about competition restrictions. Based on past cases, the FTC believes unconditional approval is unlikely.

The industry expects that even if the FTC approves the merger, it is highly likely to impose conditions such as the divestiture of certain airline route rights. The FTC aims to complete the merger review within this year, but the industry anticipates that the process may take longer since final approval requires consent from all overseas competition authorities currently reviewing the merger.

Korean Air submitted merger notification documents earlier this year to competition authorities in nine mandatory reporting countries, including Korea, the United States, China, Japan, and the EU (European Union). Among these, approvals have been received from three countries, including Taiwan, but the remaining six countries are still conducting their reviews.

Regarding this, Donggeol Lee, Chairman of KDB Industrial Bank, said at an online press conference commemorating his fourth anniversary on the 13th, "I ask that our competition authorities take a more proactive stance," adding, "From an industrial perspective and considering the ripple effects of the elimination of insolvent companies, the FTC needs to adopt a more forward-looking approach."

He also said, "When EU authorities try to regulate Amazon, Google, Facebook, etc., U.S. authorities step in to protect them, but Korean authorities seem to take a 'let's wait and see what others do' attitude, which is quite disappointing."