Korean Air (KE, Seoul Incheon) is experiencing turbulence in obtaining approval from competition authorities in the United States, Europe, and China for its planned KRW1.8 trillion won (USD1.5 billion) acquisition of a 63.88% stake in rival Asiana Airlines (OZ, Seoul Incheon), the JoongAng Daily and Business Korea reported.

A South Korean government official told local media that “the US Justice Department strongly believes that a marriage between Korean Air and Asiana Airlines will impose restrictions on fair competition, so the merger will face difficulties in obtaining approval.”

The issue was reportedly discussed during a business trip to the United States by Cho Sung-wook, chair of South Korea’s antitrust agency the Korea Fair Trade Commission, in early April. The Justice Department reportedly told the Korean flag carrier to present detailed measures addressing certain competition issues, but Korean Air submitted its plans with a significant delay.

A spokesperson for Korean Air Lines cautioned: “This happens often and doesn’t mean the merger could be cancelled,” adding that the airline is “communicating with US regulators to submit the requested documents needed to approve the merger.”

The US authority has also raised the level of deliberation on the issue from simple to intensive. Korean Air is a Skyteam member with Delta Air Lines (DL, Atlanta Hartsfield Jackson), while Asiana belongs to Star Alliance with United Airlines (UA, Chicago O'Hare), and United has reportedly voiced concerns that if Asiana departs Star it will adversely affect its alliance’s members on routes to the Americas and to China and Southeast Asia.

The merger request also comes at a time when US competition authorities’ screening criteria on aviation combinations are becoming stricter - a factor which, for example, contributed to Spirit Airlines (NK, Fort Lauderdale Int'l) choosing to reject a takeover bid from JetBlue Airways (B6, New York JFK) earlier this month, on the grounds that a review may be rejected.

The Korea Fair Trade Commission “conditionally approved” the merger in February, but besides the US, authorities in the European Union and China have shown reluctance too. Brussels reportedly said it would grant approval only after distributing traffic rights and airport slots as a means of eliminating the possibility of an oligopoly.

Beijing believes the merger is likely to undermine the profitability of Chinese carriers on routes linking China and South Korea. The Busan-Qingdao Jiaodong and Seoul Incheon-Dayong routes would become the combined entity’s exclusive domains, while its market share of Seoul-Xi'an Xianyang would reach 96.3%; 66.5% on Busan-Beijing; and 65.3% on Seoul-Shenzhen. China has expressed its concern that Air China, China Eastern Airlines, China Southern Airlines, and Shenzhen Airlines may suffer damages from the merger.