Japan approves Korean Air-Asiana merger

Japan has finally given the nod to the merger between South Korea’s No. 1 full-service carrier Korean Air Lines Co. and No. 2 Asiana Airlines Inc. three years after the Korean airlines asked for the country’s permission, raising expectations for green lights from the European Union and the US.

Korean Air announced on Wednesday that it has received approval from the Japan Fair Trade Commission (JFTC) for the merger with its smaller crosstown rival Asiana.

The approval comes after Korean Air has agreed to yield some of its slots, or operation permission, on certain routes to other airlines in response to the JFTC’s request to address concerns that the two Korean airlines’ union could hamper competition on seven routes, including Incheon (Gimpo)-Osaka, Incheon-Sapporo and Busan-Fukuoka.

Still, Korean Air and Asiana can operate the most lucrative Gimpo-Haneda route, the fastest skyway between Seoul and Tokyo, which has been exclusively operated by Korea’s only two full-service carriers.

Korean Air asked for the JFTC permission to allow its acquisition of Asiana in January 2021.

With Japan's approval of the merger, expectations are growing that the last two antitrust bodies of the US and the EU will follow suit, joining the other 11 countries that have already okayed the linkup.

PENDING APPROVAL FROM THE EU AND THE US

Korean Air and Asiana requested approval for their union from 14 entities, including the UK, China, Australia and Türkiye, where they fly the most.

Of them, Japan, the US and the EU are considered the most concerned about the two Korean flag carriers’ excessive power in the aviation market after the merger, which could obstruct market competition.

The European Commission (EC), the antitrust body of the EU, already rejected the deal in May last year due to monopoly concerns following its preliminary review but Korean Air resubmitted new offers, including the disposal of Asiana’s lucrative cargo business, to clear a major hurdle to its merger.

The EC pointed to Korean Air’s and Asiana’s nearly 60% combined share of Korea-Europe cargo routes as of 2022.

In early November last year, Asiana’s board of directors gave the green light to Korean Air’s plan to carve out the former’s cargo business, which helped Asiana rake in 3 trillion won in sales in 2022, accounting for more than half of its total annual revenue.

Korean Air has also offered to give up four profitable routes between Korea and Europe.

Earlier this month, Reuters exclusively reported that Korean Air was set to win EU approval to buy Asiana as the two Korean airlines plan to sell Asiana’s cargo unit and divest routes to four European cities, citing unnamed sources.

The EU is expected to announce its final decision on the consolidation in early February.

The US antitrust body, which also rejected the merger in May last year, is expected to make its final decision in the first half of this year after reviewing the two Korean flag carriers’ new offers to ease monopoly concerns.

Considering that Air Premia, a Korean low-cost carrier, is also operating flights between Korea and the US in addition to Korean Air and Asiana, monopoly concerns about the latter two’s merger have abated, said industry experts, projecting approval from the US.

In November 2020, Korea Air agreed to buy financially-strapped Asiana for 1.8 trillion won ($1.3 billion) and initially planned to complete the acquisition by the end of the first half of 2021 and launch the merged entity in 2022.

Their marriage is expected to create the world’s seventh-largest air carrier.

Write to Nan-Sae Bin at binthere@hankyung.com


Sookyung Seo edited this article.