hankyoreh

Korean Air and Jin Air passenger planes (Yonhap)

UK competition authorities are putting the brakes on a merger between Korean Air and Asiana Airlines.

The authorities asked the airlines to present solutions for predicted “monopoly” concerns, including rising ticket prices and a decline in cabin services. Analysts suggested that the schedule for the merger’s approval could end up delayed, while some flights between Incheon and London could end up being given to UK airlines.

In a message posted on its website Thursday, the UK’s Competition and Markets Authority (CMA) said that the merger “would risk higher prices and a reduced quality of service for passengers flying between London and Seoul.”

Colin Raftery, who as senior mergers director for the CMA oversees its review of the Korean Air-Asiana merger, said, “Should Korea Air and Asiana Airlines fail to address our concerns, this deal will progress to a more in-depth investigation.”

The format for merger reviews in the UK and the European Union involves receiving and reviewing plans from the companies in question for assessing and resolving restrictions on competition, with in-depth investigations adopted in cases where these plans are deemed inadequate.

The CMA has asked Korean Air to present a proposal by Nov. 21 for corrective measures to dispel concerns about limitations on market competition. After looking at the airline’s plans for resolving restrictions on competition, the authority plans to decide by Nov. 28 on whether to accept the Korean Air proposal or begin the second stage with an in-depth investigation.

In addition to passenger flights, the CMA also predicted a monopoly could “result in higher costs for UK businesses transporting products to or from South Korea.”

Industry observers read the decision as signaling that the UK was throwing the brakes on the merger.

“There has been talk about the UK’s Virgin Atlantic operating a route between London and Incheon,” an industry source explained, predicting the possibility that the UK government “could offer support to suit its own interests” in terms of traffic rights and slots.

“From the UK’s standpoint, it has no reason to simply approve the merger unconditionally,” the same source said.

Other analysts said the UK had given Korean Air “an opportunity.”

“Korean Air has accepted a test where the correct answer is ‘resolving a monopoly,’” said Korea Aerospace University professor Yoon Moon-gil in a telephone interview with the Hankyoreh.

“All they have to do is write the right answer and the UK is likely to grant its approval,” he suggested.

He also predicted that Korean Air “will have no choice but to give up some of the flights to UK airlines like Virgin Atlantic in order to resolve the monopoly.”

To complete procedures for its merger with Asiana, Korean Air needs the approval of the EU and four countries: the UK, the US, China and Japan. The airline has requested approval for its merger with Asiana from competition authorities in 14 countries; it has already received it from nine of them, including South Korea, Turkey, Taiwan and Vietnam.

Another industry source predicted that the decisions of the US and EU — the two major markets for flights — would “have an impact on other countries’ reviews.”

In an Oct. 21 parliamentary audit by the National Assembly Land, Infrastructure and Transport Committee, South Korean Minister of Land, Infrastructure and Transport Won Hee-ryong predicted that the review process for the Korean Air-Asiana merger would be “finished by around next year.”

Korean Air stressed that the UK government’s announcement demanding corrective measures for competition restrictions was “not a final decision,” adding that it would “submit a plan shortly for additional corrective actions.”

By Choi Woo-ri, staff reporter

Please direct questions or comments to [english@hani.co.kr]