Upcoming Korean Air Merger... November as a Turning Point

Passed in Australia last September... Results in the US and UK next month
Other countries expected to be affected depending on US decision

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Hyun-seok] As the corporate merger review of Korean Air and Asiana Airlines is underway in countries around the world, results are expected to be announced in the United States and the United Kingdom as early as next month. If the U.S. approves, positive effects are anticipated for the remaining countries.

According to the aviation industry on the 27th, the U.S. and the U.K. are expected to announce the results of the corporate merger review of Korean Air and Asiana Airlines sometime next month.

The U.S. Department of Justice has been conducting interviews related to the main merger review since this month by meeting with Korean Air executives and officials, and is reportedly reviewing the post-merger remedies proposed by the company. In the case of the U.K., the first review results are scheduled to be announced by the 14th of next month. The U.K. Competition and Markets Authority (CMA) examines whether the merger will reduce market competition or lead to a decline in service quality.

The most important country is the U.S. Given its large market size and influence, the U.S. decision is expected to affect the outcomes of future reviews. However, a positive result from the U.S. is anticipated. Historically, the U.S. has approved most airline mergers. During the 2014 merger of American Airlines and U.S. Airways, the U.S. Federal Trade Commission initially judged the merger to violate antitrust laws but resolved the issue by requiring the sale of slots to other airlines.

Korean Air appears to be aware of this and has established agreements with domestic and foreign airlines to present alternative carriers. Air Premia, a domestic airline, began operating the Incheon?LA (Los Angeles) route this month, and British airline Virgin Atlantic is expected to operate the Incheon?London route.

If approvals from the U.S. and the U.K. are obtained, Korean Air will only have to undergo corporate merger reviews in the European Union (EU), Japan, and China. Korean Air has filed for merger approval in 14 countries including South Korea. Among these, reviews have been completed in nine countries, including Australia, which approved the merger last September.

Although U.S. approval is expected to have a positive impact, some opinions suggest that the situation is not yet secure. China could reject the merger at any time depending on diplomatic relations. Additionally, the EU did not approve Korea Shipbuilding & Offshore Engineering's acquisition of Daewoo Shipbuilding & Marine Engineering earlier this year due to concerns over monopoly in the liquefied natural gas (LNG) carrier market. Professor Hwang Yong-sik of Sejong University commented, "In Europe, decisions tend to be all or nothing once the process begins," adding, "Many cases are considered from the EU's perspective, which sometimes leads to disapproval."

The final decision is expected next year. Since Japan and the EU are still in the pre-review consultation stage, it is likely that decisions will be made after the results from the U.S. and the U.K. Minister of Land, Infrastructure and Transport Won Hee-ryong recently stated at the National Assembly Land, Infrastructure and Transport Committee's comprehensive audit that the corporate merger review of Korean Air and Asiana Airlines is being explored through diplomatic channels and is expected around next year.