Korean Air should do more to ease foreign regulators' concerns
Another foreign antitrust agency has decided to suspend the approval of Korean Air's acquisition of Asiana Airlines. The U.S. Department of Justice reportedly said Tuesday it would watch more of Korean Air's remedies to address the regulator's concerns over the planned acquisition before deciding whether to approve it. A day earlier, Britain's Competition and Markets Authority put the brakes on Korean Air's bid, calling for similar corrective actions. The flag carrier should go all out to seal the acquisition by providing additional documents.
The U.S. and U.K. regulators cited possible monopolies concerning the profitable routes between Incheon and Los Angeles or London as the reason for reining in the acquisition. In addition, they pointed out that the integration of the two airlines might push up airfares while negatively impacting service quality. Multinational companies in the aviation and shipbuilding industries must win the permission of the countries where they do business to acquire competitors. If one of the countries opposes, the deal fails.
Korean Air must win the approval of 14 countries. Nine have given the go-ahead, but five ― the two countries mentioned above and the EU, China, and Japan ― are still reviewing the application. A corporate acquisition of this scale is essential for the industry's successful restructuring, and its failure can adversely affect the national economy. A case in point was Hyundai Heavy Industries' abortive bid to merge with Daewoo Shipbuilding & Marine Engineering due to the EU's opposition earlier this year.
Industry analysts and Korean Air officials appear optimistic about the eventual success of the acquisition. They noted that the U.S. and U.K. authorities were delaying decisions, due to the fact that their countries' air carriers desire to serve the routes. Whatever the reason for such delays, Korean Air must provide more detailed documents to explain the domestic industry's situation and ease monopoly fears.
The government also should not look on with folded arms but provide indirect support by mobilizing diplomats to persuade Washington and London. Korea's aviation industry, reeling from the COVID-19 pandemic, will face difficulties ahead should the acquisition fall through.
Another foreign antitrust agency has decided to suspend the approval of Korean Air's acquisition of Asiana Airlines. The U.S. Department of Justice reportedly said Tuesday it would watch more of Korean Air's remedies to address the regulator's concerns over the planned acquisition before deciding whether to approve it. A day earlier, Britain's Competition and Markets Authority put the brakes on Korean Air's bid, calling for similar corrective actions. The flag carrier should go all out to seal the acquisition by providing additional documents.
The U.S. and U.K. regulators cited possible monopolies concerning the profitable routes between Incheon and Los Angeles or London as the reason for reining in the acquisition. In addition, they pointed out that the integration of the two airlines might push up airfares while negatively impacting service quality. Multinational companies in the aviation and shipbuilding industries must win the permission of the countries where they do business to acquire competitors. If one of the countries opposes, the deal fails.
Korean Air must win the approval of 14 countries. Nine have given the go-ahead, but five ― the two countries mentioned above and the EU, China, and Japan ― are still reviewing the application. A corporate acquisition of this scale is essential for the industry's successful restructuring, and its failure can adversely affect the national economy. A case in point was Hyundai Heavy Industries' abortive bid to merge with Daewoo Shipbuilding & Marine Engineering due to the EU's opposition earlier this year.
Industry analysts and Korean Air officials appear optimistic about the eventual success of the acquisition. They noted that the U.S. and U.K. authorities were delaying decisions, due to the fact that their countries' air carriers desire to serve the routes. Whatever the reason for such delays, Korean Air must provide more detailed documents to explain the domestic industry's situation and ease monopoly fears.
The government also should not look on with folded arms but provide indirect support by mobilizing diplomats to persuade Washington and London. Korea's aviation industry, reeling from the COVID-19 pandemic, will face difficulties ahead should the acquisition fall through.
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