UK regulator flags concerns over Korean Air-Asiana merger

The British antitrust watchdog raised concerns over the impact on competition of the proposed merger between South Korea’s two largest carriers, raising expectations that it could influence the decisions of other countries such as the US on the combination of Korean Air Lines Co. and Asiana Airlines Inc.

The Competition and Markets Authority (CMA) on Monday requested the two full-fledged carriers to submit proposals to address its competition concerns by Nov. 21. The regulator will consider whether to accept these in principle or refer the deal for a tougher investigation by Nov. 28.

“Korean Air and Asiana Airlines are the two main players on the London to Seoul route and the deal risks UK customers and businesses paying over the odds or receiving a lower quality of service,” CMA Senior Mergers Director Colin Raftery said in a statement.

“Should Korea Air and Asiana Airlines fail to address our concerns, this deal will progress to a more in-depth investigation.”

Korean Air plans to fully cooperate with the CMA as the authority has yet to make a final decision.

“We are smoothly in detailed talks with the CMA,” said a company official. “We will make corrective measures as soon as possible and submit them.”

NEEDS APPROVAL FROM FIVE AUTHORITIES

Since Korean Air announced its 1.8 trillion won ($1.4 billion) takeover of Asiana in late 2020, South Korea’s top airline has received the go-ahead from nine authorities, including a conditional nod from Korea’s antitrust body.

It still must go through reviews by five others – the US, China, Japan, the European Union and the UK.

The British watchdog’s decision is likely to have an impact on the EU since the London-Seoul is one of the busiest routes between South Korea and Europe.

Potential disapproval by the CMA within this month could jeopardize the schedule of the deal to create the world’s seventh-largest airline, industry sources in Seoul said.

The US already prepared a more thorough review of the combination than expected, South Korean government and airline industry sources said in April.

Korean Air Chairman Cho Won-tae in June said, however, he still expected antitrust authorities in the US, the EU and others to approve the merger within this year.

CONCERNS OVER COMPETITION

The CMA said the merger could undermine competition in both passenger and cargo service markets.

The merger would risk higher prices and reduced quality of service for passengers flying between London and Seoul As Korean Air and Asiana are the only carriers operating direct passenger flights for the route, it said.

Demand for the flights tumbled due to COVID-19, but it is likely to rebound to the pre-pandemic level of around 150,000 passengers in 2019 in the next few years, according to the authority.

For cargo services, the merger was also expected to reduce competition as the two airlines are the main suppliers of direct services between the two countries, the CMA said.

“The deal could therefore result in higher costs for UK businesses transporting products to or from South Korea,” it said.

Write to Seo-Woo Jang at suwu@hankyung.com
Jongwoo Cheon edited this article.