The European Commission’s competition authority is reportedly on the verge of approving Korean Air’s bid to acquire a significant stake in its rival, Asiana Airlines. According to sources cited by Reuters, the approval for this major aviation industry consolidation is expected in mid-February. Korean Air, based at Seoul Incheon, aims to take over a 63.9% shareholding in the financially troubled Asiana Airlines, also based in Seoul.
This anticipated approval by the European Commission is contingent on several critical conditions. Both Korean Air and Asiana Airlines have agreed to make substantial concessions to address competitive concerns. These include surrendering slots at key European airports such as Frankfurt International, Rome Fiumicino, Barcelona El Prat, and Paris CDG. Moreover, Asiana Airlines is set to divest its profitable cargo business as part of the deal. Despite these concessions, the merged entity will continue operations at 10 European airports.
The merger, which has been closely watched in aviation circles, still requires approvals from the United States and Japan. The decision from the Japanese authorities is expected to align with the outcomes from the European Commission and the US. However, the US Department of Justice, known for its stringent stance on airline mergers, has indicated a more cautious and potentially protracted review process.
As part of the merger process, there’s growing interest from local airlines in acquiring Asiana’s cargo business. Air Premia, Air Incheon, Eastar Jet, and Jeju Air have all shown formal interest, with financial negotiations and investor discussions underway. The cargo business is expected to be sold for around KRW500 billion (USD375 million), although the buyer will also inherit a significant amount of debt and the need for new aircraft acquisitions.
In the race to acquire Asiana’s cargo operations, Jeju Air and Eastar Jet are emerging as frontrunners, with Jeju Air’s robust cash reserves giving it a competitive edge. There are also unverified reports of Asiana’s main creditor, the Korea Development Bank, encouraging Jeju Air’s bid. t’way Air, another South Korean carrier, is favored to take over the passenger operations at the four European airports affected by the slot surrender.
This potential merger represents a significant reshaping of the airline industry in Asia and globally, with Korean Air poised to significantly expand its footprint. However, the outcome hinges on the pending approvals from the US and Japanese authorities, with the US Department of Justice’s decision being particularly crucial given its recent history of scrutinizing airline mergers closely.
