The European Commission (EC) has given its approval for the acquisition of Asiana Airlines (OZ) by Korean Air (KE), subject to specific conditions, following a comprehensive assessment of the potential impact on competition between Europe and South Korea in both the air cargo and passenger air transport markets.
The assessment followed a detailed timeline:
- Notification and Investigation Initiation: The transaction was officially notified to the European Commission on January 13, 2023. Subsequently, on February 17, 2023, the Commission initiated an in-depth investigation into the proposed merger.
- Statement of Objections: On May 17, 2023, the Commission issued a Statement of Objections to Korean Air, outlining its preliminary concerns regarding potential competition issues in the markets related to the transaction. Within its investigation, the European Commission must evaluate mergers and acquisitions involving companies that exceed specified turnover thresholds, as set out in Article 1 of the Merger Regulation. This responsibility aims to prevent concentrations that could substantially hinder effective competition within the European Economic Area (EEA) or any significant part thereof.
During the investigation, the EC identified concerns that the acquisition could potentially harm competition for air cargo transport services between Europe and South Korea, as well as passenger air transport services on specific routes between Seoul and European destinations such as Barcelona, Paris, Frankfurt, and Rome.
The EC concluded that the airlines involved are direct competitors in these markets, meaning that a merger could significantly reduce customer choices. Moreover, other competitors might encounter barriers that make it difficult to expand their services and exert sufficient competitive pressure on the merged company. As with most merger reviews, the issue revolves around the potential for higher prices and reduced quality for passengers and cargo customers.
To address these concerns, Korean Air offered remedies, including divesting OZ’s global cargo freighter business and providing necessary assets to rival airline T’Way Air (TW) to commence flight operations on the four overlapping routes. These commitments aim to ensure effective cargo and passenger transport competition between South Korea and the EEA.
Following a market test and feedback collection from customers and competitors, the EC determined that these commitments adequately address the competition concerns. As a result, the EC approved the transaction with the condition that KE fully complies with its obligations.
To ensure adherence to these conditions, an independent trustee will be appointed to oversee the implementation of the remedies under the supervision of the EC.
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