A top European Commission (EC) official has given a positive assessment for the first time to remedial measures submitted by Korean Air to the EC for its merger with Asiana Airlines.
“We have seen very positive progress on some of the proposals in Korean Air’s remedial measures,” EC Justice Commissioner Didier Lender told local reporters, according to Reuters on Dec. 7 (local time).
“We will provisionally come to a conclusion with regard to a review of a marriage between Korean Air and Asiana Airlines by February 14, 2024,” the EC said in an announcement on its website on Dec. 6.
The corrective action plan that the EC deemed as positive progress is the proposed sale of Asiana Airlines’ cargo business. Asiana Airlines held an extraordinary board meeting on Nov. 2 to consider and passed a resolution on whether to agree to Korean Air’s corrective action plan. The main content was a proposal to sell Asiana Airlines’ cargo business. At the time, there was a lot of disagreement among Asiana Airlines board members and the board meeting was adjourned once. But it was finally passed, and Korean Air submitted the new corrective measures to the EC. The new corrective measures included the sale of Asiana Airlines’ cargo business and another Korean airliner’s entry into four European routes from Incheon to Paris, Frankfurt, Rome, and Barcelona.
One of the challenges for Korean Air in its negotiations with the EC was to loosen its grip on the Korea-Europe cargo business. Only in the first half of this year, Korean Air proposed simply selling off the Asiana Airline freighter fleet to the EC. When the EC rejected this proposal, Korean Air eventually made a stronger proposal to sell off Asiana Airlines’ entire cargo business. In addition, Korean Air promised to find a Korean low-cost carrier (LCC) to buy Asiana Airlines’ cargo business and wrap up the transaction with the LCC.
The sale of Asiana Airlines’ cargo business is also being closely watched by U.S. competition authorities, so once this issue is resolved, U.S. authorities will be more likely to approve the merger. EC, U.S. and Japanese authorities are the only remaining ones from which Korean Air has to receive approval.
Air cargo airplanes mainly carry high-tech products such as semiconductors and biopharmaceuticals classified as strategic goods by the United States and Europe. South Korea is a major producer of semiconductors and biopharmaceuticals, so the merger could raise transportation prices for high-tech products, some analysts say.
Insiders of the Korean airline industry are concerned about whether there will be a Korean LCC that can actually take over Asiana Airlines’ cargo business. Jeju Air, a large LCC, did not participate in the bidding from the beginning, and T-way Air is also negative about acquiring Asiana Airlines’ cargo business. “Small and medium-sized LCCs such as Asiana Premia are considering acquiring the cargo business from Asiana Airlines but the actual acquisition of it is not clear yet,” said an industry insider.