Korean Air-Asiana merger secures final EU approval

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Korean Air-Asiana merger secures final EU approval

Published: 28 Nov. 2024, 18:14 Updated: 28 Nov. 2024, 18:28

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

Korean Air's Boeing 787-9 aircraft pictured in August. [KOREAN AIR]

The European Union accorded a final green light for Korean Air's proposed takeover of Asiana Airlines, constituting a merger of Korea's two full-fledged carriers, clearing a major regulatory hurdle for the four-year deal to give birth to the world's seventh-largest carrier.

The Korean flag carrier said on Thursday that it had received a nod for the $1.1 billion deal, first initiated in November 2020, upon fulfilling all the conditions the EU had requested.

With the approval, Korean Air gained permission from 13 out of 14 countries excluding a pending review by the United States.

“We've reported the EU's approval to the U.S. Department of Justice and plan to conclude the deal within December,” Korean Air said in a statement Thursday.

The U.S. Department of Justice normally contemplates legal action only if concerned regarding a merger's potential monopoly. It has yet to launch any, which the industry believes could be seen as a green light.

An Asiana Airlines plane takes off from Incheon International Airport. [NEWS1]

The EU's final approval came nine months after the European Commission, the EU's executive body, granted conditional approval in February if the deal met certain prerequisites, including the sale of Asiana's cargo business and transfer of four overlapping European passenger routes to a domestic low-cost carrier.

Korean Air has already surrendered the routes — Rome, Barcelona, Frankfurt and Paris — to domestic budget carrier T'way Air and supported it “in various aspects for the operation, including aircraft, flight attendees and equipment.”

Korean Air, in August, also sealed a legally binding agreement with Air Incheon to sell Asiana's freight business for 470 billion won ($337 million). Air Incheon is planning to start the cargo business in July.

The country's largest carrier proposed 1.5 trillion won for the takeover of Asiana, for which it has already paid some 700 billion. It is scheduled to pay the remaining 800 billion won by Dec. 20 to acquire 64 percent to become the largest stakeholder in Asiana.

Korean Air will keep Asiana as a subsidiary for two years before fully subsuming the carrier. The two airlines will exchange employees during the intermediary period.

The merger is taking quite a bit longer than others in history, as Delta Air Lines' merger with Northwest Airlines in 2008 was approved in six months while United Airlines' merger with Continental Airlines obtained regulatory permission in five months. American Airlines' merger with US Airways took only 10 months to reach final approval.

The size of the deal may be the biggest reason that deepens the consideration. The successfully merged entity will become a mega carrier generating some 20 trillion won in annual sales, placing it as the seventh-largest carrier in the world. It will have a work force of 30,000 as well as some 230 aircraft.

Korean Air Lines recently has been inking contracts for new aircraft in rapid succession, including a memorandum of understanding for the purchase of 20 Boeing 777-9 and 30 Boeing 787-10 aircraft. It plans to introduce 33 Airbus A350 planes and 50 A321 NEOs, expanding its fleet of environmentally friendly planes to 203, by 2034.

BY SARAH CHEA [[email protected]]