Korean Air faces headwind from US, EU over Asiana Airlines acquisition

Korean Air B787-9 / Courtesy of Korean Air

Flagship carrier expected to yield more key routes, slots to foreign rivals

By Kim Hyun-bin

Korean Air is facing growing headwind in its bid to acquire domestic rival Asiana Airlines as U.S. and European transport authorities are increasingly reluctant to give the green light, citing concerns about monopoly, according to industry officials and media reports, Friday.

According to Politico, the U.S. Department of Justice (DOJ) is reviewing options to file a lawsuit to block the acquisition of Asiana Airlines by Korean Air. The possible lawsuit is based on concerns that the acquisition could harm competition in passenger and cargo transportation between the U.S. and Korea. However, the decision to file a lawsuit has not been finalized.

While the U.S. does not have jurisdiction over Korea-based airlines, Politico reported that it could explore measures to prevent corporate consolidation if it has a negative impact on competition within the U.S.

The DOJ has been reviewing the Korean Air-Asiana merger since November 2020. The key concern is the potential impact on overlapping routes in the U.S., which could harm local airlines.

Both Korean Air and Asiana Airlines operate flights to New York, Los Angeles (LA), San Francisco and Seattle.

If the DOJ files a lawsuit, it would be the first case in which the U.S. government has initiated legal action to block a merger between foreign airlines.

“At the last meeting with the DOJ on May 12, Korean Air learned that the authority has neither taken a position nor confirmed the timeline. Korean Air and the DOJ will continue the dialogue until the final decision is made by the DOJ,” a Korean Air official said.

In addition, the EU's executive body informed Korean Air by issuing a statement of objections (SO) on May 17 that the merger could limit market competition.

The European Commission's investigation revealed concerns about the potential contraction of passenger transportation services on routes to four European countries ― France, Germany, Italy, and Spain ― as well as the potential impact on cargo transportation services between Europe and Korea. The commission's basic position is that there is a lack of solutions to address monopolistic issues in the operation of passenger and cargo transportation services on these four routes following the merger.

Korean Air proposed giving up some slots on major routes to Europe. However, these proposals were reportedly rejected by the EU.

Even if Korean Air submits additional modifications, there is still a possibility that the EU will disapprove the merger. In 2021, the EU did not approve the merger of the top three airlines in Canada and Spain due to monopoly concerns.

If the EU does not approve the merger, Korean Air's acquisition of Asiana Airlines can be ditched. Despite obtaining approvals from 11 countries, including the U.K., the merger cannot proceed if any of the competition authorities in the U.S., EU or Japan refuse to approve.

“Korean Air has made, and continues to make, every effort to obtain all necessary approvals by emphasizing that the majority of the customers on the affected routes are Korean nationals and that the airline fully complies with a robust and comprehensive set of remedies ordered by Korea's Fair Trade Commission,” the company official said.