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| Hamjin Group Chairman Cho Won-tae / Courtesy of Korea Air |
By Kim Hyun-bin
Korean Air plans to submit additional data to address monopoly concerns over its scheduled takeover of Asiana Airlines raised by British competition authorities, the air carrier said Tuesday.
The British Competition and Markets Authority (CMA) announced that it would suspend its review, saying that the acquisition could result in higher prices and lower-quality service for passengers traveling between London and Seoul.
"The announcement of the CMA is an interim result of the business combination review and is not a final decision," a Korean Air official said. "We are currently discussing detailed corrective measures with the British authorities."
The CMA plans to decide by Nov. 28 whether to accept Korean Air's proposal or initiate an in-depth second-stage review. If the CMA accepts Korean Air's proposal, the deal is approved, and if there are any problems, a second review will be conducted, postponing the decision further.
The CMA predicted that the combination of the two airlines would reduce the options for consumers on London-Seoul flights. Due to the absence of U.K. airlines operating in Korea, Korean Air and Asiana are the only two airlines operating nonstop services between London and Seoul, raising competition issues once the deal is complete, as the only competition they would face would be from carriers offering connecting flights, which the CMA states will present "much weaker options" for customers.
"Korean Air and Asiana Airlines are the two main players on the London to Seoul route, and the deal risks U.K. customers and businesses paying over the odds or receiving a lower quality of service. Should Korea Air and Asiana Airlines fail to address our concerns, this deal will progress to a more in-depth investigation," said Colin Raftery, senior mergers director at the CMA.
In 2019, prior to the pandemic, around 150,000 people traveled between the two capitals, although demand has been decimated as a result of COVID-19.
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| A Korean Air B787-9 aircraft / Courtesy of Korean Air |
The CMA determined that U.K. companies shipping products to and from Korea are likely to pay higher shipping costs after the deal is completed.
Meanwhile, as the CMA's first investigation results came out negative, it is expected that the pending reviews by other major countries will also be disrupted. Korean Air's acquisition of Asiana Airlines can only take place after obtaining approval from 14 major governmental bodies. Currently, the deal has been approved by nine countries. The five that have not made a decision are the U.K., the U.S, the European Union, Japan and China.
"It will most likely come down to what the U.S. is expected to decide on the Korean Air-Asiana deal," an industry official said. "The decision is expected to have an impact on the other remaining countries' decisions."
The U.S. Department of Justice, the U.S. competition authority, is set to make its decision on Nov. 15 (local time). The industry predicts that the remaining countries are highly likely to proceed with their reviews in accordance with the U.S. decision.
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