UK gives Korean Air, Asiana one week to address merger concerns

The UK competition regulator said it would launch a more in-depth investigation into Korean Air Lines Co. and Asiana Airlines Inc. if the carriers fail to allay concerns their proposed merger would lead to higher prices for passengers and impact cargo operators. 

The airlines have until Nov. 21 to submit proposals to address competition concerns, the Competition and Markets Authority said Monday. The CMA then has until Nov. 28 to consider whether to accept in principle or refer the deal for an in-depth phase 2 investigation, it said in a statement.

“Korean Air and Asiana Airlines are the two main players on the London to Seoul route and the deal risks UK customers and businesses paying over the odds or receiving a lower quality of service,” CMA Senior Mergers Director Colin Raftery said. 

Korean Air announced its plan to buy Asiana in 2020, as the aviation industry was hammered by the Covid pandemic. The transaction was initially due to close at the end of last year, but has been repeatedly extended amid concern from some regulators that the carrier would be overly dominant on some routes.

Korean Air’s parent Hanjin Group said at the outset that the main goal of the acquisition was to stabilize South Korea’s aviation industry and improve competitiveness. Countries with a population of less than 100 million people generally have only one full-service carrier, it said.

Korean Air and Asiana are the only carriers operating direct passenger flights between London and Seoul, so the only competition the merged business would face on the route would be from indirect flights, which the CMA said were “a much weaker option for customers.”

Around 150,000 passengers traveled from London to Seoul in 2019, before the pandemic, and demand is expected to return to that level in the next few years, the CMA said.

The airline’s market share could rise to more than 50% after a takeover, though concessions may be needed to win final antitrust approvals, Bloomberg Intelligence analysts Tim Bacchus and Eric Zhu wrote last month. That might include relinquishing some flights and slots, possibly leading to share declines on key routes including New York, Los Angeles, London, Paris and Frankfurt. 

The merger is still subject to clearance in the US, China, Japan and the European Union.