The European Commission has informed Korean Air of its preliminary view that its proposed takeover of Asiana may restrict competition.
In a statement of objections released on May 17, 2023, the Commission’s advised that its concerns relate to markets for passenger and cargo air transport services between the European Economic Area (EEA) and South Korea.
Korean Air and Asiana are the two largest airlines in South Korea meaning any merger could have a detrimental effect on competition and the price passengers are charged.
In February 2023 the Commission launched an in-depth investigation into the proposed takeover of rival Asian by Korean Air.
According to the EU Commision there were concerns the merger between the carriers “may reduce competition in the markets for passenger and cargo air transport services between the EEA and South Korea”.
This investigation has included, among others, analyzing internal documents provided by the parties and gathering information and views from competing airlines, potential market entrants and customers.
As a result of this in-depth investigation, the Commission is concerned that the merger may:
- Reduce competition in the provision of passenger transport services on four routes between South Korea and France, Germany, Italy and Spain.
- Reduce competition in the provision of cargo transport services between all of Europe and South Korea.
If the takeover went ahead the Commission has concluded that the new airline, “would be by far the largest carriers of passengers and cargo on these routes and the merger may remove an important alternative for customers”.
The Commision also said in a statement: “Other competitors face regulatory and other barriers to expanding their services and may be unlikely to exert sufficient competitive pressure on the merged entity. The merger may therefore lead to increased prices or decreased quality of passenger and air transport services.”
According to the Commission the statement of objections does not “prejudge the outcome of the investigation and Korean Air now has the opportunity to reply.
The Commission has until August 3, 2023, to take a final decision.
The South Korean government first announced its intentions to merge Korean Air and Asiana in November 2020, with Korean Air set to take over an estimated 31% stake in Asiana.
On March 1, 2023, after two years of investigation, the UK’s Competition and Markets Authority (CMA) gave the merger between Korean Air and Asiana its approval.
The CMA was concerned that Korean Air and Asiana Airlines are the only operators between London and Seoul so competition would only come from carriers offering indirect flights.
Undertakings made by Korean Air that helped with the approval included agreeing to make slots available for Virgin Atlantic to operate between London and Seoul.