EU launches antitrust probe on Korean Air-Asiana deal

The European antitrust regulator opened a full-scale probe on the proposed takeover of Asiana Airlines Inc. by Korean Air Lines Co., given concerns that the deal to create the world’s No. 7 carrier may reduce competition in the market.

The European Commission said on Feb. 17 that its preliminary investigation indicated that South Korea’s two largest airlines are strong and close competitors in the provision of passenger and cargo air transport services between the European Economic Area (EEA) and South Korea.

“The transaction could eliminate potential competition in passenger transport services between the EEA and South Korea,” the European Union watchdog said in a statement.

“The transaction could reduce competition in the provision of cargo transport services between Europe and South Korea … Other competitors face regulatory and other barriers to expand their services and may be unlikely to exert sufficient competitive pressure on the merged entity,” the statement continued. 

Korean Air and Asiana dominated key routes between South Korea and major European cities, making up 100% of flights between Incheon International Airport, the country’s main gateway, and Barcelona, 75% of the routes for Rome, 68% of the services for Frankfurt and 60% of the flights for Paris as of 2019 before COVID-19 broke out.

MAY ADJUST FLIGHT SCHEDULES, REDUCE SLOTS

The commission is scheduled to decide by July 5 whether to approve or block the deal. If the EU regulator disapproves of the acquisition, it will block the deal regardless of other countries' decisions.

The deal is under investigation by the US, UK and Japan’s antitrust bodies, although 14 nations including South Korea, China, Australia, Singapore, Thailand and Vietnam have already given their nods. The UK competition watchdog accepted remedies proposed by Korean Air in what industry observers say is de facto approval of the acquisition.

Korean Air, South Korea’s top carrier, plans to consult with the EU regulator and submit additional data as well as measures to ease its concerns.

“I understand that Korean Air did not hand in more information on purpose as the preliminary investigation is short,” said an airline industry source in Seoul. “It is much more advantageous in getting approval to provide necessary data during the in-depth probe stage and supplement it through consults with the EU. The commission is well aware of this strategy.”

The country’s flagship airline is considering discussions with other carriers to adjust flight schedules and cut slots -- authorizations to either take off or land at a particular airport on a specific day during a particular time period.

“We will faithfully work on the EU competition authority’s probe to complete the combination review as soon as possible,” said a Korean Air source.

In late 2020, the carrier announced a 1.8 trillion won ($1.4 billion) plan to take over its beleaguered local rival Asiana.

Write to Ik-Hwan Kim at lovepen@hankyung.com

Jongwoo Cheon edited this article.