Home > Business > Industry

Government vows to 'minimize monopoly' of Korean Air-Asiana merger

Published: 11 Dec. 2024, 13:48 Updated: 11 Dec. 2024, 19:30

CHO YONG-JUN
[email protected]

Asiana Airlines and Korean Air planes at Incheon International Airport on Nov. 29 [YONHAP]

The Korean government said it would work to “minimize the monopoly” resulting from a proposed merger between Korean Air and Asiana Airlines following Korean Air's completion of a payment to acquire a majority stake in its competitor.

The Ministry of Land, Infrastructure and Transport said Wednesday that it would work with the Fair Trade Commission (FTC) to “manage airfares” and “prohibit disadvantages to mileage,” vowing that it would ensure the two airlines maintained the same number of seats and “quality of service” were their merger to proceed.

The airline must submit a mileage integration plan to the FTC within six months of the merger, which the commission says it will only approve if it deems it “preferable” to customers.

The airline is obligated to submit a thorough plan on how and when to integrate the customer mileage of both carriers to the Fair Trade Commission within six months of the merger.

The ministry said it would allocate Korean Air's lower-cost competitors the rights to additional medium-to-long-distance passenger routes to Europe and West Asia that larger carriers were previously asked to give up — including flights to Zhangjiajie and Xian, China; Nagoya, Japan; Jakarta, Indonesia; Phuket, Thailand; and Syndey, Australia.

Many antitrust regulators, including China's Ministry of Commerce, approved the merger on the condition that the two airlines give up overlapping route slots. Korean Air has already agreed to transfer an Incheon-London slot to Britain's Virgin Atlantic; the ministry said some routes to the U.S. and Europe that the two airlines currently operate in similar time slots will be “adjusted.”

The ministry, however, said it would lead and support Korean Air in opening new routes to Dublin, Ireland, Copenhagen, Denmark and other emerging markets. It also vowed to “minimize the cargo distribution gap” that could potentially arise from the spinoff of Asiana's cargo business, which Korean Air agreed to sell to Air Incheon in August.

The proposed merger between Korean Air and Asiana is in its final stage, having obtained final approval from the European Union in late November, four years after the two companies initiated the merger plan. Only the U.S. Department of Justice's decision remains pending.

Korean Air acquired a 63.9 percent stake in Asiana Airlines for 1.5 trillion won ($1.07 billion) via a third-party share issuance on Wednesday. The deal will make Asiana a subsidiary of Korean Air starting Thursday under the Commercial Act.

Korean Air will maintain Asiana as a subsidiary for two years before fully subsuming the carrier.

The JoongAng Ilbo, an affiliate of the Korea JoongAng Daily, reported that the airline would announce an executive reshuffle this week, which will involve appointing Korean Air executives to Asiana Airlines in an effort to kick off the merger.

Korean Air Senior Managing Director Song Bo-young is expected to take over as CEO of Asiana Airlines. New CEOs of Air Seoul and Air Busan also expected to come from Korean Air.

Payrolls for Asiana's staff, including cabin managers and ground staff, increase to match those of the Korean Air, which is higher by 10 to 20 percent, according to JoongAng Ilbo.

BY CHO YONG-JUN [[email protected]]