Some Routes May Be Redistributed to Foreign Airlines
The Fair Trade Commission (FTC) is expected to conditionally approve the business combination between Korean Air and Asiana Airlines. Some of the two airlines’ exclusive routes are likely to be distributed to foreign airlines, not Korean low-cost carriers.
Industry watchers say that it is difficult to expect the FTC to judge that the business combination between the two airlines does not restrict competition. Since the combination is between No. 1 and No. 2 players, monopoly and oligopoly problems will inevitably arise no matter how the merger is analyzed.
"The FTC officials who are reviewing the proposed merger say that certain measures should be taken to address competition restrictions," said Cho Sung-wook, chairman of the FTC.
To ensure that the merger does not restrict competition, measures to ease such restrictions must be implemented before endorsing the merger.
When Korean Air and Asiana are combined, they will monopolize some routes. If other airlines take them, it can partially ease competition restrictions. Redistributed routes are likely to go to foreign airlines because it is questionable whether Korean low-cost carriers have the ability to operate international long-distance routes. Industry analysts say that it is difficult for Korean low-cost carriers to receive distributed routes in light of the aircraft fleet they operate.
In addition, many of Korea's low-cost carriers have equity ties with Korean Air and Asiana Airlines. Jin Air, Air Busan, and Air Seoul are subsidiaries of either of the two companies. The FTC cannot give the redistributed routes to their subsidiaries. However, Jeju Air and T'way Air have no equity relationship with the two, so it is theoretically possible for these two low-cost carriers to take over the redistributed routes.
Target routes will be some of the Korea-America and Korea-Europe routes used by Korean Air and Asiana Airlines. Some analysts say that the FTC may believe that no competition restrictions occur with regard to domestic routes because there are many low-cost carriers that offer services on them.