Korean Air's takeover of rival Asiana Airlines and then the merger of the two companies continue to be questioned by the Korean Fair Trade Commission (KFTC). The review of Korean Air's acquisition of Asiana Airlines has just been extended until October.
In January, Korean Air announced its acquisition of Asiana Airlines to nine countries that have significant traffic with Korea. The Thailand is the third country to have just approved the idea of a merger - after the Turkey and Taiwan. But we still have some convincing to do China, the United States, Japan,...
Korean Air's takeover of rival Asiana Airlines and then the merger of the two companies continue to be questioned by the Korean Fair Trade Commission (KFTC). The review of Korean Air's acquisition of Asiana Airlines has just been extended until October.
In January, Korean Air announced its acquisition of Asiana Airlines to nine countries that have significant traffic with Korea. The Thailand is the third country to have just approved the idea of a merger - after the Turkey and Taiwan. But we still have some convincing to do China, the United States, Japan, the European Union and Vietnam. But that's far from a foregone conclusion!
Especially since the KFTC, in extending its investigation into the economic consequences of the Korean Air-Asiana Airlines merger highlights a malaise existing. Indeed, public opinion and political circles are regularly concerned about a possible increase in post-merger air fares.
Fear of price rises
According to a report by representative Park Sang-hyuk of the Democratic Party of Korea, the new entity would effectively hold a market share of over 50 % on 32 of the 143 international routes operated by the two companies. In particular, the company holds a absolute monopoly on seven routes. This includes Seoul to Chicago, Los Angeles and New York in the United States. In the rest of the world, the routes to Barcelona are concerned, SydneyPalau and Phnom Penh. On routes from Seoul to Delhi, Honolulu, Phuket and Rome, the market share of the future Korean airline giant would reach 75 %. Korean's fear of controlling the setting of tariffs therefore seems very plausible.
Korean Air denies this. It has stated on several occasions that there would be no no unjustified increase in air fares. The reason given is government restrictions on fares. The State imposes a ceiling on the setting of prices. In addition, while Korean competition will certainly weaken, the large number of foreign companies on the market will continue to weigh on prices.
However, there are still concerns about rate increases. Most current fares remain well below the maximum limit set by the government. The KFTC analysed the fares charged on five routes between Korea and the United States. To conclude that the current pricing was 31% to 42% below this famous ceiling. This would give Korean Air some leeway to raise prices. As for the argument put forward by Korean Air concerning the presence of foreign airlines, this is not true on a certain number of routes. Industry experts therefore stress that more coercive control measures will be needed before the merger is approved.
