The European Commission (EC) announced its approval of Korean Air’s business combination with Asiana Airlines on February 13.
This approval comes in the form of conditional clearance, which is subject to the airline’s compliance with certain commitments agreed upon with the EC. As a result, Korean Air has now successfully obtained approval or completed the review process with 13 of the 14 regulatory authorities requiring business combination approvals.
Korean Air initiated a pre-consultation process with the EC in January 2021, followed by the submission of a formal merger notification in January 2023.
The EC opened a Phase II review of the merger in February, and issued a Statement of Objections in May in which the EC expressed competition concerns resulting from the merger in both passenger and cargo markets.
To address the identified competition concerns, commitments have been offered, primarily consisting of two elements: (1) divestment of Asiana Airlines’ cargo freighter business, and (2) providing support to ensure the entry by a new airline on the four overlapping passenger routes between Korea and the European Union.
These measures are designed to maintain a competitive environment in the relevant markets.
For the implementation of the cargo commitments, Korean Air and Asiana Airlines will need to take several steps, such as appointing an advisory firm to oversee the divestment of Asiana Airlines’ cargo freighter business, as well as initiating the bidding process, and selecting a buyer of the cargo business.
The approval by the EC of the selected buyer is required to close the airlines’ merger deal. Once Korean Air completes the acquisition of Asiana Airlines, the actual cargo divestment process will take place.
Under the passenger commitments, T’way Air has been appointed as the “remedy taker” on the designated European passenger routes.
Starting from the second half of this year, T’way Air will gradually initiate operations on the four routes: Seoul Incheon-Paris, Seoul Incheon-Rome, Seoul Incheon-Barcelona, and Seoul Incheon-Frankfurt. Korean Air plans to provide comprehensive support to T’way Air.
With the EC approval secured, Korean Air continues to be focused on its discussions with the U.S. competition authority to finalize the overall merger review processes as soon as possible.
Since January 2021, Korean Air has filed merger notifications to a total of 14 competition authorities.
A total of 13 authorities, including the EC, have since either approved the merger or concluded the review of the merger on the ground that the merger was not subject to review or report.
