The European Commission has opened an in-depth investigation to assess, under the EU Merger Regulation, the proposed acquisition of Asiana by Korean Air. The Commission is concerned that the transaction may reduce competition in the markets for passenger and cargo air transport services between the European Economic Area (‘EEA') and South Korea.
Korean Air and Asiana are respectively the first and second largest airlines in South Korea. They operate a network of domestic routes, short-haul routes in Asia as well as long-haul routes between South Korea and the rest of the world.
The Commission's preliminary concerns
The preliminary investigation indicates that the companies are strong and close competitors in the provision of passenger and cargo air transport services between the EEA and South Korea. In particular, the Commission found that:
The transaction could reduce competition in the provision ofpassenger transport services on four routes between South Korea and the EEA. In those routes, Korean Air and Asiana compete head-to-head, and in two of those routes, they are the only two companies offering direct services. Other airlines may be unlikely to exert sufficient competitive pressure on the merged entity.
The transaction could eliminate potential competition in passenger transport services between the EEA and South Korea.
The transaction could reduce competition in the provision of cargo transport services between Europe and South Korea. Korean Air and Asiana compete head-to-head in carrying cargo between the EEA and South Korea. Other competitors face regulatory and other barriers to expand their services and may be unlikely to exert sufficient competitive pressure on the merged entity.
Despite the severe impact of the coronavirus pandemic in the passenger air transport sector, it is unlikely that Asiana and Korean Air would stop competing or be significantly less competitive absent the transaction.
The Commission will therefore now carry out an in-depth investigation into the effects of the transaction to determine whether its initial competition concerns are confirmed.
The transaction was notified to the Commission on 13 January 2023. Korean Air and Asiana decided not to submit commitments. The Commission has 90 working days, until 5 July 2023, to take a decision. The opening of an in-depth investigation does not prejudge the outcome of the investigation.
Companies and products
Korean Air, headquartered in South Korea, is a full-service carrier with domestic and international operations in passenger and cargo air transport. It operates a hub-and-spoke network with its principal hub at Incheon airport in Seoul. Korean Air is a member of the SkyTeam alliance.
Asiana, headquartered in South Korea, is a full-service carrier with domestic and international operations in passenger and cargo air transport. Asiana is a member of the Star Alliance.
Merger control and procedure
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
In addition to the current transaction, there are currently eight on-going Phase II merger investigations: (i) the proposed acquisition of OMV Slovenija by MOL; (ii) the proposed acquisition of VOO and Brutélé by Orange; (iii) the proposed acquisition of Alumetal by Hydro; (iv) the proposed acquisition of Activision Blizzard by Microsoft; (v) the proposed acquisition of eTraveli by Booking; (vi) the proposed acquisition of Lagardère by Vivendi,(vii) the proposed acquisition of VMware by Broadcom, and (viii) the proposed acquisition of Inmarsat by Viasat.
Source: European Commission Press Service