EU antitrust regulators said on Wednesday that Korean Air Lines's proposed acquisition of rival Asiana may restrict competition in passenger and cargo air transport services between Europe and South Korea.
The statement released by European Commission read,
The European Commission has informed Korean Air of its preliminary view that its proposed acquisition of Asiana may restrict 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 and short-haul routes in Asia as well as long-haul routes between South Korea and the rest of the world.
The European Commission opened an in-depth investigation to assess whether Korean Air's acquisition of Asiana was likely to restrict competition in the provision of air passenger and cargo services between the European Economic Area (‘EEA') and South Korea.
The deal, announced by Korean Air in late 2020, would see it become the biggest shareholder in indebted Asiana, the biggest shake-up in the country's aviation industry in nearly three decades.
The EU competition enforcer said it had sought feedback from rival airlines, potential market entrants and customers on the potential impact of the deal.
As per European Commission , in February 2023, it opened an in-depth investigation to assess if Korean Air's acquisition of Asiana may restrict competition in the provision of passenger and cargo air transport services between the EEA and South Korea.
"The Commission has conducted a wide-ranging investigation to understand the potential impact of the deal. This investigation has included, among others, analysing internal documents provided by the parties and gathering information and views from competing airlines, potential market entrants and customers."
As a result of this in-depth investigation, the Commission is concerned that the transaction may:
Korean Air and Asiana compete head-to-head in carrying passengers and cargo between the EEA 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.
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.
In an another development involving efforts for the merger, after getting the nod from Korea Fair Trade Commission (KFTC) and Australian Competition and Consumer Commission (ACCC) for the acquisition of the rival Asiana Airlines , Korean Air have been making continuous talks with several Southeast Asian carriers to share its Incheon-Los Angeles route , which is an effort to get antitrust approval from US regulators in its acquisition process.
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. It has its principal hub at Incheon airport in Seoul. Asiana is a member of the Star Alliance.
A Statement of Objections is a formal step in an investigation, where the Commission informs the companies concerned in writing of the objections raised against them. The sending of a Statement of Objections does not prejudge the outcome of the investigation. Korean Air now has the opportunity to reply to the Commission's Statement of Objections, to consult the Commission's case file and to request an oral hearing.
European Commission says,
The transaction was notified to the Commission on 13 January 2023. The Commission opened an in-depth investigation on 17 February 2023 and now has until 3 August 2023 to take a final decision.
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 six on-going Phase II merger investigations: (i) the proposed acquisition of OMV Slovenija by MOL; (ii) the proposed acquisition of eTraveli by Booking; (iii) the proposed acquisition of Lagardère by Vivendi; (iv) the proposed acquisition of Inmarsat by Viasat; (vi) the proposed acquisition of VMware by Broadcom; and (vi) the proposed creation of a joint venture by Orange and MasMovil.
Source : European Commission Press Release
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