Korean Air-Asiana Merger Stalled by Regulatory Hurdles in EU, U.S., and Japan

SEOUL: The proposed merger between Korean Air Co. and Asiana Airlines Inc., South Korea's two full-service carriers, remains in limbo as it struggles to gain antitrust approval in key markets.

According to Yonhap News Agency, the nearly three-year-old proposed merger worth 1.8 trillion won (US$1.34 billion) has already secured approval in 11 countries but is yet to clear three critical markets: the European Union, the United States, and Japan.

In May, the European Commission (EC) warned Korean Air that the merger could limit competition in passenger and cargo air transport services between the EU and South Korea. In response, Korean Air has proposed to sell Asiana's cargo business, a plan that is yet to gain the approval of Asiana's board of directors. The board, in its Monday meeting, engaged in a debate over whether selling the cargo business could constitute a breach of trust and whether the sale would outweigh the benefits of retaining the division.

Adding to the complexity, Asiana's labor union and former CEOs have also voiced opposition to the sale of the cargo division. A Korean Air representative said in a statement to Yonhap News Agency that the company could not submit the required remedies to the EC by the end of October as initially planned. Now, submission is expected to be delayed until early November and will also include a plan to divest passenger flight routes to four European cities.

While Asiana's board is set to hold a follow-up meeting on Thursday, even an approval for the cargo business sale from the board does not guarantee immediate approval of the merger by the EC. However, it is expected to increase the likelihood of a conditional approval. Conversely, rejection could potentially put an end to the merger deal.

In the U.S., the situation is equally uncertain. Politico reported in May that the U.S. Department of Justice is considering legal action to block the deal on competition grounds. According to data from Open Secrets, a U.S. nonprofit organization, Korean Air has spent $520,000 on lobbying in the U.S. since the start of 2022 to try to secure the merger's approval.

As these regulatory battles unfold, shares of Korean Air rose 3.02 percent to 20,500 won, while those of Asiana Airlines surged 8.04 percent to 11,150 won on Tuesday, outperforming the broader KOSPI's 1.41 percent loss for the day.

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