FTC approves merger of Korean Air and Asiana

Economy

Published: 22 Feb. 2022, 15:50

FTC approves merger of Korean Air and Asiana

Korean Air and Aisana planes at Incheon International Airport on Tuesday. [YONHAP]

The Fair Trade Commission (FTC) greenlit a merger between the two big Korean airlines but asked them to give up some overlapping routes for the sake of competition.

On Tuesday, the FTC approved Korean Air’s acquisition of 63.88 percent of Asiana Airlines.

“The merger is the first major change in our aviation transportation market, after it was split between two major airlines 30 years ago,” said FTC Chairwoman Joh Sung-wook. “It is also the first merger of full service carriers.”

The condition is the airline must give up traffic rights or landing slots on 26 international and 14 domestic routes in which the market shares of the two airliners are over 50 percent. They include major destinations such as New York, Los Angeles, Beijing, Sydney and Phuket.

Together, the two airlines have 65 international and 22 domestic flight routes.

On some routes, such as to San Francisco and Honolulu, the combined market share of the airlines is 80 percent while competing with other airlines such as United and Hawaiian Airlines,

Direct routes between Korea and LA, New York and Barcelona, they control all scheduled flights.

By region, five flight routes to the U.S. have to be adjusted, six to Europe, five to China, one to Japan, six to Southeast Asia and three to other regions.

Those routes contribute significantly to the airlines' profits.

The airlines are being given 10 years to execute the plan.

FTC Chairwoman Joh Sung-wook announces the Korean antitrust agency's decision on a conditional approval of merger between Korean Air and Asiana at the FTC's headquarters in Sejong, Tuesday. [YONHAP]

The FTC also set several conditions to keep customers from being hurt by the merger.

The merged airlines will be prohibited from raising fares more than the rate of increase in consumer prices until its market share on all flights is 50 percent or less.

The airlines will not be allowed to reduce benefits offered to frequent fliers compared to those offered in 2019.

The airlines will have to submit to the FTC and get approval for how they combine their loyalty programs six months after the merger.

“Keeping the pressure of competition on long international and mid-range flights is very important in protecting consumers using air transportation,” FTC Chairwoman Joh said.

There are doubts that Korean budget airlines will be able to take routes given up by Korean Air and Asiana as they don't have many long-distance planes.

The FTC noted that only allowing other domestic airliners to compete for the routes would be discrimination against foreign airlines.

The FTC approval is not the final step. Approvals are still pending in six countries including the U.S., EU, Japan, China, UK and Australia.

Eight countries have approved the merger: Turkey, Taiwan, Vietnam, Malaysia, the Philippines, Thailand, New Zealand and Singapore.

The two airlines own budget airlines: Jin Air is owned by Korean Air. Air Busan and Air Seoul are owned by Asiana.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]