Malaysia’s aviation regulators have proposed to approve the merger between Korean Air and Asiana Airlines, noting that the move “would not infringe” local laws.
In findings released on 17 August, the Malaysian Aviation Commission (Mavcom) took the view that there were “significant economic efficiencies or social benefits” with the merger, while noting that it would “have limited unilateral effects” on airfares.
Mavcom scoped its analysis on one direct route between South Korea and Malaysia — Seoul-Kota Kinabalu — given that both Korean Air sister company Jin Air and Asiana low-cost arm Air Seoul operate the route.
Jeju Air, a low-cost carrier unaffiliated to the merger, is the third Korean carrier to operate direct flights between both cities.
The commission found that although the post-merger market share on the route would be high — based on 70-80% share in a pre-pandemic setting — it “would have limited unilateral effects as the parties will not be able to increase the airfares above competitive levels”. This is because South Korea’s Ministry of Land, Infrastructure and Transport regulates airfares set by the country’s carriers.
“The commission also notes that the…route is a relatively thin route. Given the nature of the route where majority of the passengers are non-time sensitive, there is limited impact on the passengers as they would always have the option to choose one-stop services instead,” Mavcom adds.
The commission adds that the barrier to entry on the route remains low, as all three carriers have added extra seats from 2016 to 2019.
Moving beyond the Seoul-Kota Kinabalu analysis, Mavcom also accepted Asiana’s “failing firm defence”, in which it notes that the Star Alliance carrier was facing substantial financial challenges and was “unlikely to be able to meet its financial obligations in the near future”.
“It is unlikely that any less anti-competitive alternative is available to the merger for Asiana to remain in operation,” Mavcom adds.
Lastly, the commission states that there were benefits to be had with the merger, including improved safety and reduced training costs, as well as efficiencies related to MRO services between both carriers.
Mavcom has released its proposed findings for public consultation until the end of August.
Korean Air announced it was acquiring its compatriot and one-time rival Asiana in November 2020, amid the coronavirus pandemic which had battered the country’s airline sector.
In January, it submitted business combination reports to various regulators around the world, including to the US, South Korea, China and the European Union.
The Turkish Competition Authority was first to clear the planned merger, Korean Air disclosed in February. Within Southeast Asia, Thailand and the Philippines gave the green light for the merger in May.