U.K. Watchdog Gives Green Light to Korean Air-Asiana Merger

Korean Air is another step closer to taking over ailing Asiana Airlines as the U.K.'s Competition and Markets Authority gave the green light to the planned merger of the two flag carriers.

The takeover has already been approved by Korea's own Fair Trade Commission and 11 countries including China and Australia. But the EU and Japan have yet to approve it after demanding some changes to allay monopoly concerns.

A Korean Air staffer said, "The remaining merger authorization process is expected to be completed in the first half." 

Korean Air has proposed measures to quell monopoly concerns, but there are fears that Korea's airline industry could take a hit if some overlapping flight slots and routes are ceded to foreign carriers in order to get the merger approved. 

For example, Korean Air offered to cede Asiana's slots on the Incheon-London route to Virgin Atlantic. Korean Air has 10 slots a week at London's Heathrow Airport and Asiana seven. 

The EU has now started the second phase of its approval process. Together Korean Air and Asiana account for 60 percent of markets in Paris, Frankfurt, Rome and Barcelona, so there is a strong chance that the flag carriers may hand over some of their routes to European airlines. They also have overlapping routes to New York, San Francisco and other U.S. cities.  

Industry insiders feel that Korean Air should let domestic budget carriers take over some routes instead. T'way Air and Air Premia recently bought large aircraft and embarked on longer-haul flights.

One industry insider said, "There are budget carriers that want to operate long-distance flights and are capable of leasing large aircraft, so it's disappointing to see the rights being handed over to foreign airlines. Given Korean fliers' preference for domestic carriers, we will only see an increasing preference for Korean Air." 

But a Korean Air staffer said, "There were no opportunities [for Korean budget carriers] during the merger review because they do not have many long-distance flights. If Virgin Atlantic give up routes or fails to operate them for a minimum amount of time, other carriers including domestic budget airlines will get their chance." 

Travelers are more worried that the merger could lead to skyrocketing ticket prices or deteriorating service quality.

The Gimpo-Haneda route is a prime example. Both airports are located closer to Seoul and Tokyo than the bigger airports of Incheon and Narita, so the route is considered extremely lucrative, and at the moment Korean Air and Asiana have a 100 percent stranglehold on it.

The situation is the same for the Incheon-Jakarta route and some flights to China. Another industry insider said, "Once a route is monopolized by a single carrier, tickets can get more expensive than when rival airlines compete. After the merger, there's a danger that Korean Air will jack up prices on routes it has a monopoly on."