FTC sees collusion in Mongolia fares

The Fair Trade Commission said yesterday it has issued corrective orders to Korean Air and Miat Mongolia Airlines for monopolizing Korea-Mongolia air routes.

According to the antitrust watchdog, the two carriers, which dominate the Incheon-Ulan Bator route, colluded since 2005 to prevent competitors including Asiana Airlines from launching services to Mongolia.

The occupancy rate of the Incheon-Ulan Bator route was 94 percent in August 2011, the peak travel season, while occupancy rate for all international routes was 84 percent in the same period. Passengers using the route have complained difficulty in getting tickets to Ulan Bator and the fare is much higher than that of flights of similar lengths.

The Korean government has been trying to expand the number of flights on the Incheon-Ulan Bator route in bilateral talks with the Mongolian government since 2005 but the talks broke down when the Mongolian side refused to add more.

“To influence the bilateral talks, Korean Air offered various goodies to Mongolian aviation officials, their families and relatives such as free trips,” said Yoon Su-hyun, an official at the FTC’s international cartel division. “The Korean government tried to add more flights as Korean Air operates five flights a week, but the attempts were rejected by the Mongolian government due to the collusion of the two air carriers.”

The watchdog said Korean Air in 2010 spent 16 million won ($13,600) to bring 20 Mongolian aviation officials and their friends to Jeju Island, providing flight expenses and accommodations.

Under the Korea’s aviation law, new carriers can enter a route when more than six flights a week are operated. Yoon said the two sides conspired to effectively prevent competitors from launching services on the Incheon-Ulan Bator route. Korean Air has been operating the route since 1999.

The watchdog also said the two airlines have been charging higher rates than on other routes of similar lengths.

Whereas Incheon-Ulan Bator takes three and a half hours one way and a ticket costs 333,000 won in 2010, other routes of similar distances are cheaper. A flight to Hong Kong costs 271,000 won and Shenzhen 254,000 won, the FTC said.

Korean Air denied the accusations of collusion. “We have never colluded with Miat Mongolian Airlines,” said Lee Sang-ik, a spokesman for Korean Air.

By Kim Mi-ju [mijukim@joongang.co.kr]