Korean Air has received approval for its merger with Asiana Airlines from Japan’s competition regulator, facing the final hurdle in its quest to become Korea’s megacarrier.
The Japan Fair Trade Commission (JFTC), Japan’s competition authority, approved the merger of Korean Air and Asiana on Jan. 31.
This means that Korean Air has received approval from 12 of the 14 countries that can give Korean Air their approval for the merger, excluding the United States and the European Union.
With the EU Commission expected to give conditional approval to the merger soon, many observers say that only U.S. approval remains.
But predictions are mixed on how tough the United States will become about giving approval.
First of all, the United States is considered a relatively easy country for Korean Air to get approval from. This is because the airline has an aviation liberalization agreement with South Korea, which allows Korean airlines to operate services to the United States without traffic rights. So, many experts have fewer concerns about United States restricting competition.
The fact that Korean Air, Asiana, and Air Premia are currently running routes to the Americas is also a positive factor in getting rid of such concerns. This is because most experts believe that these routes are already in a competitive environment.
However, some recent observations suggest that the United States may be as fastidious about the merger as Europe. With Japan’s competition authorities demanding that Korean Air relinquish seven routes even though there are relatively fewer competition concerns, there is still a chance that the United States may put the brakes on the merger while demanding a number of requirements.
The biggest issue is how the U.S. government will react. In fact, the U.S. Department of Justice is considering filing a lawsuit to block Korean Air’s acquisition of Asiana Airlines on the grounds that it impedes competition, according to a report by local media outlet Politico.
Another task is to convince United Airlines of the United States, which has been a partner of Asiana Airlines. United Airlines is reportedly opposed to the marriage between the two Korean carriers, fearing that Asiana Airlines’ merger with Korean Air will reduce the competitiveness of routes that United Airlines and Asiana Airlines are jointly operating.
Korean Air is also faced with another challenge in its pursuit of a merger with Asiana Airlines. Depending on negotiation situations, it may face criticism that it is ceding some slots to its competitors. In fact, Korean Air has reached an agreement with Japanese competition authorities to transfer some slots on seven passenger routes between Japan and Korea if an alternative carrier requests them.
Some experts forecast that the EU Commission will also give its approval on the condition that some slots at four European airports be given to the EU Commission. This is because, as Korean Air has submitted a remedial action plan to sell its cargo business to Asiana Airlines and transfer some of its operating rights and slots on routes to four European cities, the EU Commission will give its approval in exchange of the most favorable conditions. The EU Commission is scheduled to wrap up its review by Feb. 14 at the latest.
Korean Air plans to sell off its cargo business within this year after receiving approval from both European and U.S. competition authorities to incorporate Asiana Airlines as a subsidiary.