EU rejection of Canadian Air merger may affect Korean Air-Asiana deal

Korean Air B737-900 / Courtesy of Korean Air

By Kim Hyun-bin

The European Union's (EU) rejection of Air Canada's merger with Transat AT has raised concern that it may also object to deny Korean Air's planned acquisition of Asiana Airlines.

The country's leading carrier needs to receive approval from nine antitrust authorities, where it operates. Only Turkey has approved the deal so far, while eight other countries or blocs ― Korea, the United States, the EU, China, Japan, Vietnam, Taiwan and Thailand ― have yet to green light the proposed acquisition.

A minimum of four approvals are needed, excluding the host country, for the merger to take place. But if Korean Air fails to win approval of all, it could be banned from operating in countries that did not give approval for the deal.

According to the aviation industry, Korean Air plans to submit a detailed merger plan to the EU explaining the local aviation crisis and emphasizing that there are limited concerns of a monopoly on direct and transfer flights from Korea to Europe and vice versa.

Korean Air says chances are low that the foreign anti-trust authorities will reject the merger just because of monopoly concerns because there are already larger airlines than Korean Air in operation. Through the merger, Korean Air is expected to become the seventh largest airline in the world.

But the recent rejection of the Air Canada deal is raising concerns.

Air Canada scrapped its proposed acquisition of Transat AT after being advised by the European Commission that it would face high regulatory hurdles.

Canada's largest airline said that after recent discussions with the European Commission (EC), it had become evident that the EC would not approve the deal based on the proposal the carrier made earlier this year.

“The EU has requested additional changes to the proposal considering the impact it would have on European routes. The changes could have been made by Air Canada, but they chose to cancel the merger instead rather than persuade the EU authorities,” Korean Air said. “Also in the case of Air Canada and Transat AT there were 30 overlapping routes to Europe, where as Korean Air and Asiana only have four.”

The four are Paris, Rome, Frankfurt and Barcelona.

Korean Air is set to emphasize that its acquisition of Asiana Airlines will have less of an impact on European airlines, and that if the merger is rejected and Asiana is banned from flying to overlapping European countries, it will reduce the number of flights from Europe to Korea which will also limit the choices for European passengers.

There is a small chance Korean Air will cancel the takeover of Asiana as the top local carrier is expected to fully abide by any rectification requests from the EU to achieve even conditional approval.