The European Commission conditionally approved Korean Air’s takeover of Asiana earlier this year (read more here) and gave the final green light for this purchase yesterday.
The EU’s green light comes after Korean fulfilled key conditions, including appointing T’way Air to replace Asiana on four overlapping European routes and selecting Air Incheon to purchase Asiana’s cargo operations.
You can access Korean Air here and Asiana here.
Korean Air plans to inject 800 billion won ($573 million) to secure a controlling 63.9% stake in Asiana by December 20, 2024.
Initially, both carriers will operate independently as Korean Air works to stabilize Asiana’s financial situation and manage workforce. The full merger, including a combined entity launch, is expected within two years.
Combined LCC
A significant part of the merger involves the integration of the low-cost carriers (LCCs) operated by both airlines. Korean Air’s Jin Air, along with Asiana’s Air Busan and Air Seoul, will be unified under a single brand. The merged LCC will dominate the Korean market, becoming the largest by revenue.
Combining Workforce & Frequent Flier Programs
- Job Security: Korean Air has pledged to avoid compulsory layoffs, but skepticism persists among Asiana employees, many of whom face overlapping roles. The industry will closely watch how Korean Air manages this delicate integration process.
- Mileage Integration: Unifying the loyalty programs of both carriers presents another hurdle. Korean Air’s mileage points are considered more valuable, leading to concerns about potential discrepancies in conversion rates. Asiana’s frequent flyers are likely to resist devaluation of their points, making it critical to strike a balance.
European Commission’s Announcement:
Commission approves Air Incheon as the purchaser of Asiana’s global cargo freighter business offered by Korean Air
The European Commission has approved, under the EU Merger Regulation, Air Incheon as a suitable purchaser for the divestment business offered by Korean Air Lines Co., Ltd (‘Korean Air’) in order to acquire control over Asiana Airlines Inc. (‘Asiana’). The approval of a suitable remedy taker is a condition for Korean Air and Asiana to implement the transaction.
On 13 February 2024, the Commission approved the proposed acquisition of Asiana by Korean Air, conditional upon full compliance with a remedy package offered by Korean Air. As a part of the commitments, Korean Air committed to divest Asiana’s global cargo freighter business. The divestment includes freighter aircraft, slots, traffic rights, flight crew, and other employees, as well as customer cargo contracts, among others.
With today’s decision, the Commission has approved Air Incheon as the purchaser of the divestment business offered by Korean Air. Air Incheon, established in 2012, is the only South Korean airline entirely dedicated to freighter cargo transport.
The Commission found that Air Incheon fulfilled the relevant criteria of: (i) being independent from Korean Air and Asiana; (ii) having the financial resources, proven expertise and incentives to maintain and develop the divestment business as a viable and active competitive force in competition with the parties and other competitors; (iii) being a South Korean airline with an existing Air Operator’s Certificate and a hub at Incheon airport; and (iv) the divestment not raising at first sight competition concerns or risks in delaying the implementation of the commitments.
More information will be available on the Commission’s competition website, in the public case register under the case number M.10149.
Korean Air’s Release:
Korean Air gets final approval from the EC on Asiana merger
Korean Air has satisfied all conditions set by the European Union competition authority for its merger with Asiana Airlines.
The European Commission (EC) announced on November 28 that it has concluded its review after confirming Korean Air’s fulfillment of all required conditions for the merger with Asiana Airlines.
In February 2024, the EC granted conditional approval subject to two key requirements: ensuring stable operations of a remedy carrier on four overlapping European routes (Barcelona, Frankfurt, Paris and Rome) and the divestiture of Asiana’s freighter business.
Korean Air has designated T’way Air as the remedy carrier for the European routes, with commitments to provide operational support including aircraft, flight crew, and maintenance services. Air Incheon has been approved as the purchaser of Asiana Airlines’ freighter business.
Korean Air has submitted the European Commission’s final approval to the U.S. Department of Justice and plans to complete the transaction by December 2024.
Conclusion
Korean Air announced its takeover of Asiana in 2020, and here we are four years later. It seems to take another two before all these airlines will operate as one entity.
It is unclear how fast Korean Air plans to have Asiana exit Star Alliance and whether it will join SkyTeam temporarily.
The US decision should come before the end of the year, and Korean Air plans to complete the Asiana swiftly after.
It is unfortunate for Koreans and those traveling to/from/through South Korea that there will soon be several fewer carriers when these five airlines (two full-service and three LCCs) are combined into two.
