UK Competition regulators wade into Asiana and Korean Air merger

The CMA goes on to add:

The only competition that the merged businesses would face on this route would come from providers of indirect flights, which the CMA’s investigation found are a much weaker option for customers.

On this basis, the CMA found that the merger would risk higher prices and a reduced quality of service for passengers flying between London and Seoul. While customer demand has recently been lower on this route as a result of the Covid-19 pandemic, around 150,000 passengers travelled from London to Seoul in 2019 – and this level of demand is expected to return in the next few years.

The CMA also found that the merger raises competition concerns in the supply of air cargo services. The CMA found that Korean Air and Asiana Airlines are the two main suppliers of direct cargo services between the UK and South Korea and, even when taking into account the more significant competition that providers of indirect flights provide for cargo customers, would not face sufficient competition after the merger. The deal could therefore result in higher costs for UK businesses transporting products to or from South Korea.

The merger is being analyzed by other authorities, including those in the EU, China, Japan and the USA.

In Quotes

Colin Raftery, Senior Mergers Director at the CMA, said:

Korean Air and Asiana Airlines are the two main players on the London to Seoul route and the deal risks UK customers and businesses paying over the odds or receiving a lower quality of service.

Should Korea Air and Asiana Airlines fail to address our concerns, this deal will progress to a more in-depth investigation.

That’s a picky intervention…

It seems that the CMA is a little concerned over this merger/purchase, for a rather picky “Little Britain” intervention (and hopefully pushing other regulators along, to see if their concerns are mirrored (although looking at the airlines that serve Seoul, the UK could very much be on their own in this case – examples include Delta, United and American serving from their US Hubs, Lufthansa, Air France and Finnair from Europe, as well as various Chinese options serving the country).

It could be suspected that having one country’s airline providing a sole air bridge could lead to higher prices being charged – although there are indirect options (as the CMA notes) – even if they offer a slightly poorer experience.

There’s a simple way this could be resolved – by adding competition on the route – providing anyone else wants to serve it.

With the route to Seoul “traditionally” overflying Russia, airlines are shy to commit resources on routes that will require a long diversion (you only need to see Finnair’s decimated Asia network because of this), with aircraft consuming more fuel, as well as the viability of the route in these times.

Who knows, airlines are not shy of accepting route aid to start/restart a service if needed to provide the motivation to provide a service.

With those involved having until 21st November to submit proposals to address the CMA’s competition concerns, there’s a little bit of a crunch for an answer.

The CMA would then have until 28 November to consider whether to accept these in principle or refer the deal for an in-depth phase 2 investigation.