The UK's Competition and Markets Authority (CMA) has released its phase one decision regarding the merger of Korean Air (KE, Seoul Incheon) and Asiana Airlines (OZ, Seoul Incheon). In a November 14 announcement, the CMA says that the merger will likely result in a substantial lessening of competition (SLC) within a market or markets in the UK.

The review found that the merger gave rise to a realistic prospect of a SLC across three areas:

  • air passenger services on the London-Seoul route;
  • direct air cargo services between the UK and South Korea whether using dedicated freight aircraft and passenger aircraft;
  • indirect air cargo services between Europe and South Korea via the UK

"Korean Air and Asiana Airlines are the only carriers operating direct passenger flights between London and Seoul and currently compete closely for customers," said a CMA statement. "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." British Airways (BA, London Heathrow) ended its UK - South Korea flights in 2020.

"Based on share of supply data and third-party feedback, the CMA found that carriers such as Lufthansa, Finnair, Air France-KLM, Emirates, and Etihad Airways – all of which operate indirect flights on the London-Seoul route – exert a weak to moderate competitive constraint on the merged entity."

The CMA also flagged concerns regarding the carriage of cargo between the two countries, with Korean Air and Asiana being the two main suppliers of direct freight flights. "The deal could therefore result in higher costs for UK businesses transporting products to or from South Korea," the CMA said.

While multiple jurisdictions (including South Korea) have already approved the merger, several big markets, including the US, China, the EU, and the UK remain undecided. Korean Air and Asiana have until November 21 to address the concerns raised by the CMA

Korean Air told ch-aviation that they were on the "right track" to finalize the process, and would submit the updated remedies after discussions with the CMA. "Korean Air will continue to cooperate closely with the CMA and the remaining authorities to complete the merger process," the spokesperson said. ch-aviation has also approached Asiana for comment.

Following the November 21 deadline, the competition authority will then take seven days to review the responses before deciding whether to green-light the proposed merger or refer the deal for an in-depth phase 2 investigation.