MIAMI – Korean Air (KE), the country’s largest full-service carrier (FSC), has postponed its acquisition of Asiana Airlines (OZ) until 2024.
The merger would create the world’s seventh-largest airline. As such, there are many roadblocks to making the fusion a success, namely monopolization problems and the potential operations of low-cost carriers (LCC) such as KE subsidiary Jin Air (LJ), and OZ subsidiaries Air Busan (BX) and Air Seoul (RS).
Korean Air, according to Rep. Park Yong-jin of the ruling Democratic Party of Korea (DPK), submitted a post-merger integration (PMI) proposal to the Korea Development Bank (KDB), with the idea to acquire OZ by 2022 and completely integrate by 2024.
A Much Needed Approval Count
According to koreatimes.co.kr, After investing ₩1.5bn into OZ in late June to buy a 63.7% stake, KE originally expected to complete the merger by next year. This has now changed.
Industry sources cited by the South Korean news outlet say the delay is due to KE’s struggle to secure approval from eight antitrust authorities in countries where the carrier operates. While the airlines submitted the documents in January, only Turkey has accepted the agreement so far, with Korea, the United States, China, Japan, Vietnam, Taiwan, and Thailand among the seven countries that have not.
A minimum of four approvals is required for the merger to take effect, not counting the approval from the host nation. If the agreement lands flat, KE may be barred from operating in countries that oppose it.
Star/SkyTeam Alliances, US Airline Codeshares
The “Open Skies Deal” connects Korea and the United States, allowing airlines from both countries to select flight frequencies, routes, and aircraft types.
However, since OZ is a member of the Star Alliance, many US routes are likely to undergo imminent changes, such as code sharing on the Incheon-San Francisco route with United Airlines (UA) and code sharing on the New York, Los Angeles, and Seattle routes.
If the agreement is completed, OZ will join KE and the SkyTeam alliance, preventing alliances with UA on a number of US routes. There’s a good chance that antitrust regulators in the US will look into UA’s case.
Korean Air HL8027 Airbus A330-323. Photo: Nick Sheeder/Airways