South Korea’s antitrust agency conditionally approves Korean Air’s Asiana Airlines purchase

South Korea’s antitrust agency said on Feb. 22 it conditionally approves flag carrier Korean Air Lines’ planned acquisition of rival Asiana Airlines.

In a deal announced in late 2020, Korean Air planned to spend 1.8 trillion won ($1.6 billion) to become the top shareholder of indebted Asiana in one of the first major consolidations in aviation since the industry was hit by COVID-19. ($1 = 1,193.9100 won)

“This merger is a change from the system of two major airlines that dominated the South Korean air transport market for more than 30 years, and is the first-ever merger of full service carriers in South Korea,” Korea Fair Trade Commission Chairperson Joh Sung-wook told a briefing.

Out of 65 international passenger routes and 22 domestic routes in which the airlines overlap, the agency ordered Korean Air to hand over slots and traffic rights for 26 international and 14 domestic routes in the next 10 years if a newly competing airline requests them, as a condition of the approval.

Moreover, until competing airlines seek slots and traffic rights, Korean Air is ordered to limit fare increases, keep from reducing supply and make sure that service quality does not deteriorate until new market entry, Joh said.

The routes in question were where the airlines’ combined market share were 60% or more, there were few or no competitors, and the KFTC saw a high chance of a fare hike, the KFTC said.

They included routes such as Seoul-New York, Seoul-Los Angeles and Seoul-Seattle, in which the two merging airlines and Korean Air’s partner Delta Air Lines took up 100% of the market share.

“Korean Air respects the decision of the KFTC, and will continue its efforts to receive approvals from the remaining regulatory bodies,” Korean Air told Reuters on Tuesday.

Reuters.com by Joyce Lee & Heekyong Yang, Editing by Louise Heavens