Will EU block Korean Air's takeover of Asiana Airlines? - The Korea Times
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Will EU block Korean Air's takeover of Asiana Airlines?

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By Kim Hyun-bin

Industry analysts and investors are now paying keen attention to whether the European Union (EU) will block Korean Air's takeover of Asiana Airlines after vetoing Hyundai Heavy Industries' acquisition of Daewoo Shipbuilding & Marine Engineering (DSME).

The EU has a long track record of opposing large-scale mergers within the airline industry. Last year, the EU Commission turned down two major mergers between Canada's leading carrier, Air Canada, with the country's third largest airline, Air Transat, and also repeatedly took a negative stance on a merger between Spain's leading airline IAG and Air Europa citing monopoly concerns.

However, experts say Korean Air's acquisition of Asiana is different from previous airline takeover, saying it does not raise monopoly concerns because the two Korean carriers are smaller players in the global industry.

The EU Commission usually examines business mergers by going through a preliminary examination. If the EU Commission determines that a merger may impede competition, an in-depth investigation is then launched.

Most of the decisions are made after the initial review. Over the past 10 years, the EU has reviewed more than 3,000 merger deals. Among them, only 75 cases were concluded after an in-depth investigation.

The EU regards mergers as infringing on competition within the aviation industry. The number of mergers continues to rise in the airline industry as carriers face difficulties caused by the COVID-19 pandemic.
Local analysts say the situation is a little different in the case of Korean Air's acquisition of Asiana as the takeover is not likely harm European competitors or consumers, which is the EU's top concern.

"Even if Korean Air, which ranks 18th in terms of global air transport market share, and Asiana Airlines, which ranks 32nd, merge, the impact on the international aviation market will not be large, so the opposition from overseas competition authorities will not be great," Hwang Yong-shik, a professor of economics at Sejong University, said. When merged, the combined carrier is forecast to become the world's seventh largest.

An industry official familiar with the matter said there are only four overlapping routes in Europe for Korean Air and Asiana Airlines following the merger, which leaves opportunities for other airlines to enter the market.
In the case of Air Canada, about 30 routes overlapped with Air Transat, which led the EU to oppose the merger.

"So the merger has no monopoly concerns within the EU. There is no concrete reason for the EU to disapprove the merger," the official said.

In December, the Fair Trade Commission (FTC) issued a conditional approval?of Korean Air's acquisition of Asiana.

Korean Air still needs approval from seven different aviation authorities ― the U.S., China, Japan, European Union, Britain, Australia and Singapore ― for the acquisition to proceed. It has currently received approvals from Turkey, Vietnam, Taiwan and Malaysia.




Kim Hyun-bin hyunbin@koreatimes.co.kr


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