FTC signals conditional approval of Korean Air-Asiana merger
The Fair Trade Commission (FTC) tentatively gave conditional approval to the merger of Korea's two largest airlines in a rare ahead-of-decision announcement.
The FTC released a report on Wednesday that signals its decision to grant conditional approval to the purchase of Asiana Airlines by Korean Air Lines, though it noted that competition might decrease on certain routes and some slots at airports may have to be returned.
An airport slot is an authorization to take off or land at an airport on a particular day during a specified time period.
Korean Air Lines agreed to buy 63.88 percent of Asiana Airlines in November last year and plans to ultimately merge with Asiana Airlines to become the dominant carrier in Korea. Korean Air Lines registered for a business combination of the two carriers in January.
The FTC said it reviewed 250 routes operated by the two airlines and their subsidiaries. Korean Air Lines runs budget carrier Jin Air. Asiana Airlines operates low-cost carriers Air Busan and Air Seoul.
The regulator said 10 routes will become monopolized once the two entities merge. They are services connecting Incheon with Los Angeles, New York, Barcelona, Zhangjiajie, Phnom Penh, Palau, Seattle and Sydney, and services connecting Busan with Nagoya and Qingdao.
The merged airline's potential threat to the market was determined based on market share, existence of rivals and their capacity and the possibility of new entrants to the market.
The merged airline may be ordered to give up some slots to allow for competition.
"Redistribution of airport slots will allow other airlines to run flights," said Min Hye-young, a spokesperson for the FTC. Korean Air Lines said airport slots are important to the competitiveness of an airline.
The FTC is scheduled to make a decision in late January or early February following a meeting of its commissioners.
Korean Air Lines is still waiting for approvals from seven other jurisdictions: the United States, China, Japan, European Union, Britain, Australia, Singapore. It has received the green light from four countries: Turkey, Vietnam, Taiwan, Malaysia.
Wednesday's report was unprecedented, as the regulator does not normally give any indication of its thinking on combinations until it has made its final decision. The disclosure was to prevent speculation about the merger of the two carriers.
Korean Air Lines shares rose 3.28 percent on Wednesday, while those of Asiana Airlines jumped 4.09 percent.
BY JIN MIN-JI [email@example.com]