Korea's antitrust regulator has concluded that the nation's largest carrier acquiring the second-largest will cause no problems if the integrated airline fulfills certain conditions to prevent a monopoly. The Korea Fair Trade Commission (KFTC) said Tuesday that it conditionally approved the corporate combination in which Korean Air buys a 63.88 percent stake in Asiana Airlines. The market shares of the two carriers and an affiliated low-cost carrier (LCC) reach 48.9 percent in international routes and 62 percent in domestic routes.
A company that monopolizes flight routes may raise fares unilaterally to the detriment of consumers. So, the KFTC has attached conditions by requiring the two full-service carriers to return some takeoff and landing slots at airports and readjust flight licenses for 28 international and eight domestic routes if other airlines seek to operate on those routes over the next decade. It will also restrict the two airlines from hiking fares and prevent them from reducing the number of flight seats until they execute the corrective measures.
However, the government and the state-run Korea Development Bank set the stage for Korean Air to acquire Asiana. Controversy over government-directed acquisitions and preferential treatment will inevitably follow. The government needed to keep the deal from infringing on consumers' benefits while allowing smaller carriers to join the competition to secure flight routes. It was positive that the regulator had opened the way for LCCs to enter the routes monopolized by large carriers.
Now, the KFTC must see that the integrated company carries out those conditions faithfully. The aviation industry is a sector with severe ups and downs according to the fluctuating business climate. The integrated airline may call for changing conditions or disrupt market order by taking advantage of its dominant position. Already, trust in promises seems to be taken that there would be no reduction of Asiana's workforce. There are talks about the need for restructuring if the mega-carrier must return some routes. Not least because the government put taxpayers' money into the integrated airline, it should never neglect supervision and guidance on the company's management.