 |
Korean Air and Asiana Airlines planes are parked side by side at Incheon Airport. (Newsis) |
Korean Air’s 1.8 trillion won ($1.4 billion) merger with its smaller rival Asiana Airlines has secured approval from Europe’s antitrust regulator, bringing Korea’s flag carrier one step closer to becoming the largest airline in Northeast Asia.
The European Commission announced on Thursday that it has decided to give the nod to the high-profile merger, 10 months after it granted conditional approval in February when it required Korean Air to further reduce overlapping routes to four cities -- Paris, Frankfurt, Barcelona and Rome -- and sell off Asiana Airlines’ cargo business.
In recent months, Korean Air selected Seoul-based budget carrier T’Way Air as the remedy carrier for the European routes while selling the cargo business to Air Incheon, another budget carrier here.
“We are dedicated to helping domestic low-cost carriers build the capacity to operate long-haul routes, believing this move will strengthen South Korea’s aviation industry and expand consumer options overall,” a Korean Air official said. “Likewise, we expect Air Incheon, the buyer of Asiana’s cargo business, to grow into the nation’s second-largest cargo carrier and significantly contribute to the logistics sector.”
Korean Air has submitted the European Commission’s final approval to the US Department of Justice. If no complaint is filed by the US agency, the merger is expected to be completed by this year’s end.
Regarding any fresh risks from the incoming Trump administration in the US, industry watchers here downplayed the possibility.
“This has been a nearly five-year process since 2020 under the Biden administration. It seems unlikely the new president will affect the deal considering his term starts in January next year,” said Hwang Yong-sik, a professor at Sejong University's School of Business & Economics.
“Korean Air has long failed to gain growth momentum in a market divided by the top two players. Throughout the merger process, the operations of the two companies have been greatly streamlined. Korean Air, in particular, impressed the global aviation industry by boosting cargo shipping to offset pandemic losses.”
In November 2020, when its global competitors were reeling from pandemic disruptions, Korean Air made a surprise bid to acquire its crosstown rival Asiana Airlines.
With the planned merger, Korean Air, currently the world's 18th-largest airline by fleet size, is expected to ascend to No. 10. Their business synergy is estimated to yield 300 to 400 billion won a year.
The deal also faced monopoly concerns among consumers and resistance from Asiana Airlines’ labor union.
The company official emphasized that there will be no unilateral fare hike, given the intense competition in the global aviation market. For the complicated mileage swap programs, he said the airline will collaborate with an outside consulting firm to set a fair and reasonable conversion ratio.
If regulatory approvals are all secured, Korean Air intends to complete the payment of the remaining 800 billion won out of the total 1.5 trillion won acquisition cost, apart from the additional 300 billion won in perpetual convertible bonds, by Dec. 20. Following this transaction, Korean Air will hold a 63.9 percent stake in Asiana Airlines.
After a two-year grace period of independent operations, the merged Korean Air is set to officially launch in 2026.
