Proposed Merger of Korean Air and Asiana Airlines

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Boeing 777-200ER Asiana Airlines (4919721919).jpg
Korean Air (left) and Asiana Airlines aircraft

The Proposed Merger of Korean Air and Asiana Airlines is a policy announced by the South Korean Government on November 2020, during the COVID-19 pandemic, which would result in Korean Air absorbing Asiana Airlines creating a dominant carrier in South Korea. [1]

Contents

It is now viewed that the merger is increasingly unlikely given the regulatory headwinds. [2]

In order for the merger to proceed, anti-trust approval is necessary from competition authorities in key markets for the carriers. While approval has been granted from a number of essential markets, as of August 2023, it is still outstanding from three essential markets — the European Union, the United States, and Japan. [3]

In February 2023, it was confirmed that the merger would not proceed without approval from authorities in the European Union and United States. At the time, the Korean government did not view approval in the EU and US as likely. A backup plan in the form of equity investment from foreign backers (such as the UAE-based Mubadala Investment Company) into Asiana to help it remain viable is being explored. [4]

In May 2023, it was reported that the United States Department of Justice is considering filing suit to block the merger as anti-competitive. [5]

In August 2023, The Korea Economic Daily reported that the Korean Development Bank was seeking a Plan B in preparation for the proposed merger's collapse. [6] This was due to a rising belief that American and European authorities would block the consolidation.

Background

On November 2020, South Korea's Ministry of Land, Infrastructure and Transport announced Korean Air's proposed acquisition the Asiana Airlines. [7] The merger was approved in a Korean Air board meeting on same date, [8] KAL finalized the post merger integration of merger and acquisition and submitted to Korea Development Bank, state-owned bank, and main creditors of Asiana Airlines. [9]

Korea Development Bank, a state-owned bank, agreed to provide 800 billion won to Hanjin Group to help finance the merger between the airlines. [1]

Korean Air is currently a member of SkyTeam while Asiana is a Star Alliance member. If the merger is approved and completed, the combined airline would become a member of SkyTeam. [10] Meanwhile, the Ministry of Land, Infrastructure and Transport of the Republic of Korea will integrate subsidiaries Air Busan, Air Seoul, and Jin Air to form a combined low-cost carrier which will focus on regional airports in Korea. [11]

Detailed plan of merger of Asiana Airlines includes; [12] [13]

Korean Air Chairman/CEO Walter Cho and President Woo Kee-hong also stated that Asiana Club will be folded into Korean Air's SKYPASS at a later date. [15] [16]

Approval status by country

In order for the merger to proceed, anti-trust approval is necessary from competition authorities in key markets for the carriers. Some of these markets were deemed "essential" requiring approval in order for the merger to be viable, while other countries where approval was sought were considered nonessential.

Essential countries

In March 2021, KAL announced the merger with Asiana Airlines will be delayed as competition authorities had not approved the deal. Due to the delay, Asiana Airlines will be operated as a subsidiary in which the airline's operations, IT, and other systems will be operated by Korean Air until 2024. [17] [18]

The Korea Fair Trade Commission approved the merger on 22 February 2022, under condition of the airline must give up some of their airport slots and transportation rights of certain regions. [19] [20] [21]

On 26 December 2022, the Ministry of Commerce of the People’s Republic of China announced its approval of Korean Air’s merger with Asiana Airlines. [22]

The United Kingdom approved the merger on 1 March 2023. [23] [24]

Three essential countries and entities – namely the European Union, Japan, and the United States – have not approved the combination. [25]

Nonessential countries

In June 2021, the Philippines became the first of the so-called non-essential countries to approve the merger. [26] In September of the same year, the Malaysian authority also approved the antitrust deal, with Malaysia officially joining Turkey on the list of countries that approved the said deal between the two airlines. [27] [28] Vietnam became the final non-essential country to approve the merger on 16 November 2022. [29]

Effective 9 September 2021, Turkey has approved the antitrust deal. Taiwan, Thailand, Vietnam have also approved the merger. [30] [31] On June 30, it was reported that the post-merger plans between two airlines were finalized and approved by the Korea Development Bank. [32] [33] [34]

Table of approval status

TypeCountryDate of ActionNotes
MandatoryChina26 December 2022Approved by Ministry of Commerce. [35]
European UnionObjection FiledFormal objection filed by the European Commission to proposed merger. [36]
JapanUnder Review
South Korea26 December 2022Approved by Fair Trade Commission in conditional approval. [37]
United Kingdom1 March 2023Approved by Competition and Markets Authority. [23] [24]
United StatesUnder ReviewUndergoing detailed investigation by Department of Justice. [38] [5]
Non-MandatoryAustralia1 September 2022Approved by Australian Competition and Consumer Commission. [39]
Malaysia9 September 2021Approved by Malaysian Aviation Commission. [40]
Philippines1 June 2021Approved by the Philippine Competition Commission. [26]
Singapore9 February 2022Approved by Competition and Consumer Commission of Singapore. [41]
Taiwan1 June 2021 [42]
Thailand31 May 2021Approved by Trade Competition Commission. [43] [44]
Türkiye (Turkey)4 February 2021Approved by Turkish Competition Authority. [45]
Vietnam16 November 2022Approved by Ministry of Industry and Trade. [29]


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References

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