FTC approves Korean Air's takeover of Asiana Airlines with strings attached

By Kim Hyun-bin

The Fair Trade Commission (FTC) approved Korean Air's takeover of Asiana Airlines, Tuesday, with some strings attached.

The antitrust agency required the two carriers to return some time slots on their overlapping international and domestic routes. Until the measures are implemented, conditions such as a freeze on fare increases and reduced seating are to be imposed on the concerned routes, it said.

The FTC decided to give conditional approval to the business deal in which Korean Air acquires a 63.88 percent stake in Asiana Airlines.

As a result of the review, the FTC judged that there is a high risk of restricting competition on 26 of the 65 overlapping international routes between the two airlines, and 14 out of 22 overlapping domestic routes.

The 26 international routes considered to be limited in competition are the Americas (5), Europe (6), China (5), Japan (1), Southeast Asia (6) and others (3). Most of the popular routes were included, including New York, Los Angeles, Paris, Rome, Beijing, Qingdao, Sydney and Phuket.

The FTC judged that if the two companies' combined route share exceeds 50 percent, there will be restrictions on competition. The two airlines have a 100 percent market share on routes to Los Angeles, New York and Barcelona.

“We will impose structural measures that will allow Korean Air and Asiana to transfer slots and transportation rights owned for use by new entrants if requested, so as to eliminate competition restrictions,” FTC Chairman Cho Seong-wook said. "Considering the huge impact on air transport services, consumers and the national economy, we conducted the review as quickly and thoroughly as possible."

Accordingly, structural measures such as the transfer of slots and transportation rights were imposed for the next 10 years to promote new entry by competing airlines on related domestic and overseas routes. This marks the first time the FTC imposed structural measures.

“We accept the decision of the FTC and plan to do our best to get approval from overseas competition authorities in the future,” Korean Air official said.

Korean Air has received approval from seven countries ― Singapore, Vietnam, Thailand, Turkey, Taiwan, Malaysia and the Philippines ― for the integration while waiting for the green light from the remaining six authorities ― China, Japan, Britain, Australia, the U.S. and the EU.