The Korea Herald

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Korean Air to submit new merger plan to ease antitrust concerns

By Lee Yoon-seo

Published : Oct. 3, 2023 - 14:16

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Korean Air and Asiana Airlines aircraft are parked at Gimpo International Airport in western Seoul. (Newsis) Korean Air and Asiana Airlines aircraft are parked at Gimpo International Airport in western Seoul. (Newsis)

The high-profile merger between South Korea’s top two air carriers is likely to meet a watershed moment later this month as Korean Air is reportedly scheduled to submit an aggressively revised version of its acquisition proposal for Asiana Airlines to the European Commission to effectively ease the regulator’s antitrust concerns.

According to local reports Tuesday, Korean Air’s revised proposal will include the company's sale of the entirety of Asiana Airlines' cargo transportation business to a competing airline.

The remedied proposal is also rumored to include Korean Air's decision to give up its extra airport slots, or its rights to land and take off at specific times, to foreign airlines. The four airport slots in question reportedly include Korean Air and Asiana's routine connections from Incheon to Frankfurt, Paris, Rome and Barcelona.

Korean Air’s revision to its proposal plan initially submitted to the EC comes as the company aims to address the European Union antitrust regulators' concern that the merged unit could possibly dominate passenger and cargo flights connecting Korea to European cities.

In June, Korean Air announced it has asked the EC for more time to prepare changes to its acquisition plan so that it could address its concerns regarding the merged unit's possible monopolization of flights connecting Korea to Europe.

The EC has since announced that it will accept Korean Air’s request, and temporarily suspend their investigation into Korean Air's proposed acquisition of Asiana.

Regarding the rumors of Korean Air revising its proposal plan, however, industry watchers say the revised plan, if passed by EU, will reap little benefit for both companies and hurt national competitiveness in the international aviation industry -- as the plan involves the two airlines giving up some of their most profitable businesses.

"Currently, Korean Air has decided to give up its airport slots at London Heathrow seven times a week to Virgin Atlantic in the United Kingdom, and has decided to give up 46 airport slots to Chinese airlines," said an official from the aviation industry on the condition of anonymity.

"The company is also considering giving up Korean Air and Asiana’s airport slots for flights connecting Korea to New York and San Francisco to meet United States’ antitrust concerns. If they continue to give up 'golden' airport slots to foreign airlines, such actions could hurt national aviation competitiveness," the official said.

Furthermore, the sale of Asiana's cargo transportation division to a competitor could further dwindle the nation's competitiveness in the aviation sector, he added.

As of the first half of 2023, Asiana’s cargo business performance accounted for 24 percent of total sales, second only to sales generated from transporting international passengers (62 percent).

On Sept. 26, in response to rumors of Korean Air selling Asiana’s cargo division ahead of its merger, Asiana’s labor union released a statement that the sale of Asiana's cargo division will result in a surge in passenger fares and freight unit prices, and hurt consumer interests.

The labor union said via the statement that if the Korea Development Bank, the main creditor of Asiana Airlines, is truly looking out for national aviation industry's competitiveness, it should aim to fully preserve Asiana Airlines' competitiveness, including slots and cargo sectors and push for a third-party sale to a bidder other than the Korean Air.

Out of the 14 countries from which the company needs approval to complete the 1.8 trillion won ($1.3 billion) merger with Asiana, 11 countries, including Britain, China and Australia, had approved the merger. As of the first week of October, Korean Air is awaiting a decision from Japan, the European Union and the US.