FTC asked to speed up process of Korean Air-Asiana Airlines acquisition

The Korea Times

The Korea Times

Business

Sun, September 24, 2023 | 01:47

Companies

FTC asked to speed up process of Korean Air-Asiana Airlines acquisition

Posted : 2021-10-14 16:53

Updated : 2021-10-14 16:55

KDB Chairman urges FTC for quick approval

By Kim Jae-heun

Korea's airline industry is expecting travel demand to boom again after more than a two-year slump due to the COVID-19 pandemic as the government takes steps to initiate a phased return to normal starting from the second week of next month.

However, the process of Korean Air acquiring rival Asiana Airlines, which began in November of last year, is taking longer than expected,.

The Korea Fair Trade Commission (KFTC) is raising concerns over Korean Air's possible monopoly in the domestic market if the acquisition is approved. The top antitrust watchdog says the combination of two full-service carriers can infringe on free competition in the flight service market.

Top regulator Joh Sung-wook told lawmakers that the KFTC will try to conclude its review by the end of this year.

But with the start of a phased return to normal next month, the KFTC is facing calls to speed up its review, because the airline industry is one of Korea's key business sectors.

The acquisition proposal is subject to approval from countries or regions whose industries will be affected by the merger. Korean Air has sought relevant approvals however only Turkey, Taiwan and Thailand have given the deal the green light, while China, the EU, Japan, the U.S., and Vietnam are still reviewing the plan.

This led Korean Air to postpone the acquisition of Asiana Airlines shares to Dec. 31. If any of the remaining countries disapproves the deal, Korean Air will not be able to acquire Asiana.

State-run Korea Development Bank (KDB) is said to have asked the KFTC to take prompt action regarding the pending issue. The rationale is that the more time the antitrust watchdog takes to review the deal, the more time the airline industry will need to normalize operations when the phased return to normal or "living with COVID-19" plan kicks off.

"When the EU tried to regulate Amazon, Google and Facebook, the United States protected them. But Korean authorities are waiting for other countries to make the decision first before they do. It is regrettable that the KFTC is not showing enthusiasm here," KDB Chairman Lee Dong-gull said.

Sources said the KFTC is considering asking Korean Air's management and KDB to grant a "conditional approval" by redistributing transportation rights and slots with the Ministry of Land, Infrastructure and Transport in order to protect the interests of budget carriers.

Meanwhile, the former chairman of Asiana Group, Park Sam-koo, has been revealed to have included an unfavorable clause for Asiana Airlines in a contract with Gate Group affiliates. The local carrier must guarantee a minimum net profit for Gate Group until 2047.

Park was already charged with selling the exclusive business rights for in-flight meals held by Asiana Airlines in 2016. Park did not notify the matter in advance to Kumho Asiana Group or Asiana Airlines' management teams.

The value of Asiana Airlines' exclusive in-flight meal business rights was estimated at some 260 billion won. Korean Air will be responsible for addressing the issue once the Asiana acquisition plan is approved.

Currently, Korean Air's net integrated funds excluding money set aside to acquire Asiana is estimated at around 600 billion won. Korean Air is likely to bear an additional financial burden due to the agreement made by Park.

jhkim@koreatimes.co.kr