Korean Air-Asiana merger expected to get EU approval this month

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Korean Air-Asiana merger expected to get EU approval this month

Published: 12 Nov. 2024, 18:08 Updated: 12 Nov. 2024, 18:09

Planes of Korean Air and Asiana Airlines are seen on the tarmac at Incheon International Airport, west of Seoul, on Nov. 2, 2023. [YONHAP]

The merger deal between Korean Air and Asiana Airlines, Korea's two full-fledged carriers, is expected to clear a major regulatory hurdle after receiving a final nod from the European Union this month, according to industry sources Tuesday.

The European Commission (EC), the EU's executive body, is expected to make a final decision on whether to approve the 1.8 trillion won ($1.4 billion) merger deal after monitoring the operational stability of four European routes that Korean Air transferred to low-cost carrier T'way Air.

Korean Air has so far won approval from 12 countries and regions, and is waiting for final approval from the EU and the United States. Many industry watchers expect the EC, which conditionally approved the deal in February, to give final approval within the month.

The route transfer was part of remedial measures Korean Air offered to carry out to receive conditional approval from the EC for the merger.

The EC is currently reviewing whether T'way Air can operate these four routes reliably and establish healthy competition with Korean Air.

The executive body has also been conducting an on-site evaluation of Air Incheon, which was selected as the preferred bidder to acquire Asiana Airlines' cargo business. The selling of the cargo business was also proposed as part of remedies to competition concerns.

Air Incheon aims to complete the integration of Asiana's cargo operations and begin flights by July 2025.

"Korean Air cannot implement the acquisition of Asiana before having entered into a binding agreement with a suitable buyer for the cargo divestment business, who must be subsequently approved by the commission," an EC spokesperson told Yonhap News Agency when asked of the approval review status.

The spokesperson added, "The commission's assessment is still ongoing. We cannot prejudge its timing or outcome."

Industry insiders also anticipate that once the EC grants its final approval, the review by the U.S. Department of Justice (DOJ) will also conclude.

To address the DOJ's concerns regarding a monopoly on U.S. routes, Korean Air has taken proactive measures, such as expanding its code-sharing partnership with Air Premia for North American routes.

The DOJ did not offer a response when asked by Yonhap of its position on the merger deal.

If Korean Air secures approval from the United States, it will have obtained clearance from regulators in all 14 mandatory reporting countries and regions.

"Korean Air will continue to communicate closely with the relevant authorities to secure approval from the remaining regulatory bodies, including the DOJ," a Korean Air spokesperson said.

After clearing regulatory hurdles, industry watchers expect the corporate consolidation process to take around two years, during which the companies would undergo restructuring while integrating organizations, merging mileage programs and consolidating their low-cost subsidiaries.

In November 2020, Korean Air signed the deal to acquire a controlling stake in Asiana to create the world's 10th-biggest airline by fleet.

The nation's two full-service carriers account for a combined 40 percent of passenger and cargo slots at Incheon International Airport.

Yonhap