The European Commission (EC) is about to deliberate on the corrective action plan presented by Korean Air in its latest attempt to secure approval for the merger with Asiana Airlines. The proposal was submitted on November 3, following Asiana’s agreement to sell its cargo branch. Asiana’s creditors have sought to divest it for several years, and the agreement for the sale to Korean was signed in 2020.
Last May, the EC publicly expressed objections due to the potential impact on competition that the merger proposal between Korean and Asiana could generate. The concerns were twofold: firstly, a potential reduction in passenger transport services on four key routes connecting South Korea to France, Germany, Italy, and Spain; secondly, a potential reduction in cargo transport services between Europe and South Korea. If merged, the airlines would dominate the route between Korea and Europe. According to ch-aviation, Korean Air and Asiana are the only airlines operating regular passenger flights on routes between South Korea and Italy, and South Korea and Spain. They also compete with Lufthansa on the route between South Korea and Germany, and with Air France on the route between South Korea and France.
Also of interest: Korean Air receives Chinese authorization to acquire Asiana Airlines
While the content of the plan is not public, corrective measures include several concessions. In addition to the sale of Asiana’s cargo subsidiary, the companies will divest slots at four European airports and must provide services to the companies occupying those slots to fly to South Korea. Asiana Airlines’ board of directors has already approved the sale of its subsidiary. Until the end of June, Asiana operated 11 cargo planes on 21 routes, connecting 25 cities in 12 countries. The airline holds a 20.7% stake in the South Korean international cargo market.
As reported by Bloomberg, Walter Cho, CEO of Korean Air, announced that the buyer of Asiana’s cargo division must have its own air operator certificate (AOC) and «cannot simply be a random company.» Three low-cost airlines in South Korea—Air Premia, Eastar Jet, and Air Incheon—have formally expressed interest in acquiring the business.
Korean, on the other hand, also announced its intention to purchase convertible bonds from the company totaling $220 million, serving as financial support. Approval or rejection is expected in the first quarter of 2024. Korean Air and Asiana must also obtain authorization from Japanese and U.S. competition authorities. This process is expected to follow the EC’s decision and be influenced by it.
