Less than three months before a decision date deadline, the European Commission continues to hold concerns that the merger between Korean Air (KE, Seoul Incheon) and Asiana Airlines (OZ, Seoul Incheon) may have a significant competitive impact.
In a statement, the European Commission said that it has sent Korean Air a statement of their objections to the proposed merger. This follows the opening of an in-depth investigation in February. The European Commission is the EU's executive arm. Specifically, the commission has concerns on two fronts, including that the provision of passenger transport services may be reduced on four routes between South Korea and France, Germany, Italy, and Spain and that the provision of cargo transport services may be reduced between all of Europe and South Korea.
"Korean Air and Asiana compete head-to-head in carrying passengers and cargo between the EEA (European Economic Area) and South Korea. Together, they would be by far the largest carriers of passengers and cargo on these routes and the merger may remove an important alternative for customers," reads the statement. "Other competitors face regulatory and other barriers to expanding their services and may be unlikely to exert sufficient competitive pressure on the merged entity. The merger may therefore lead to increased prices or decreased quality of passenger and air transport services."
The commission is due to hand down its decision on or before August 3. According to the ch-aviation capacities module, the two Korean carriers are the only airlines that operate scheduled passenger flights on the South Korea - Italy, and South Korea - Spain country pairs, while Lufthansa (LH, Frankfurt International) competes with the two carriers on the South Korea - Germany country pair, and Air France (AF, Paris CDG) competes on the South Korea - France country pair.
On the South Korea - France country pair, Korean Air is the largest carrier, offering 40.36% of the total weekly available seats. Air France provides 32.68%, and Asiana offers 26.96%. If the two Korean airlines merged, and assuming no capacity changes, the merged entity would control 67.32% of the available weekly seat capacity. On the South Korea - Germany country pair, Lufthansa is the dominant operator, offering 56.61% of the total weekly capacity. Asiana Airlines is in second spot, with 26.52%, and Korean Air is third, offering 16.87%. Assuming no capacity changes, Lufthansa would remain the biggest operator on this country pair following any merger.
Other EU passenger carriers, including LOT Polish Airlines, Finnair, and KLM Royal Dutch Airlines fly between their home ports and South Korea, but the EU did not identify those country pairs in its latest update. All the carriers also offer cargo carrying capacity in their cargo holds, in addition to Cargolux running freighter flights between Europe and South Korea.
The merger between Korean Air and Asiana Airlines, now over two years in the making, still needs regulatory approval from the United States and Japan. In addition to receiving the green light from its own regulator, Korean Air has secured the requisite clearances from other major jurisdictions, including the United Kingdom, China, Australia, Singapore, Turkey, and Taiwan.
