European Commission Approves Korean Air's Asiana Acquisition

DALLAS — The European Commission (EC) has approved the Asiana Airlines (OZ) acquisition by Korean Air (KE), subject to certain conditions.

This decision comes after a thorough investigation into the proposed acquisition, considering its potential impact on competition between Europe and South Korea in the air cargo and passenger air transport markets.

Timeline of the Merger Assessments

The EC's investigation into the acquisition of OZ and KE followed a specific timeline:

1. Notification and Investigation Initiation: The transaction was officially notified to the European Commission on January 13, 2023. Subsequently, on February 17, 2023, the Commission initiated an in-depth investigation into the proposed merger.
2. Statement of Objections: On May 17, 2023, the Commission issued a Statement of Objections to Korean Air, outlining its preliminary concerns regarding potential competition issues in the markets related to the transaction.

In conducting its investigations, the European Commission must assess mergers and acquisitions involving companies that exceed certain turnover thresholds, as specified in Article 1 of the Merger Regulation. This duty aims to prevent concentrations that could significantly hinder effective competition within the European Economic Area (EEA) or any substantial part thereof.

Merger Investigation, Approval, Implementation

During the investigation, the EC identified concerns that the acquisition would harm competition for air cargo transport services between Europe and South Korea and passenger air transport services on specific routes between Seoul and European destinations such as Barcelona, Paris, Frankfurt, and Rome.

The EC found that the airlines in question are direct competitors in these markets, meaning that a merger would significantly reduce customer alternatives. Other competitors may also face barriers that make it challenging to expand their services and provide sufficient competitive pressure on the merged company. Like most merger pushback, the issue focuses on higher prices and lower quality for passengers and cargo customers.

Korean Air offered remedies to address these concerns, including divesting OZ's global cargo freighter business and providing necessary assets to rival airline T'Way Air (TW) to start flight operations on the four overlapping routes. These commitments would ensure effective cargo and passenger transport competition between South Korea and the EEA.

After conducting a market test and gathering feedback from customers and competitors, the EC determined that these commitments adequately address the competition concerns. As a result, the EC approved the transaction with the condition that KE fully complies with its obligations.

To ensure compliance, an independent trustee will be appointed to monitor the implementation of the remedies under the supervision of the EC.

Featured image: The merger between the two South Korean carriers was announced in November 2020. Photo: Hyeonwoo Noh, CC BY-SA 4.0, via Wikimedia Commons