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On the 5th, the legislative investigation office of the National Assembly summarized major issues in the FTC’s review of Korean Air’s acquisition of Asiana Airlines in a report on’Issues and Issues related to M&A of Large Airlines (FSC).
The legislative investigation agency virtually refuted Korean Air’s position that the two airlines’ share of Incheon Airport’s passenger slot (aircraft take-off and landing allowance) is 38.5%, and that the monopoly problem will not be significant. The report emphasized that this figure is only the slot share of the integrated airline for all international passenger routes departing from Incheon, not the share of individual routes.
The Legislative Research Office said, “There is no possibility of replacing demand (travelers) between routes with different destinations,” and said, “This is a meaningful data for determining whether the slot share in individual routes connecting each city is a real monopoly.” He stressed that this should be carefully reviewed in future FTC review.
Even if there is a great concern over competition restrictions, if Asiana is recognized as a so-called’non-renewable company’, it can obtain joint approval. The legislative investigation office pointed out that there are several variables in this regard.
In order for Asiana to be recognized as a non-renewable company, it must be insolvent or expected to be in such a state soon. In addition, unless it is acquired by Korean Air, it is difficult for Asiana’s production facilities to continue to be used in the air transportation market, and there should be no alternative that has less competition restrictions than the acquisition of Korean Air.
Earlier, the Fair Trade Commission applied these principles in April of last year and approved Jeju Air’s Eastar Jet corporate defect despite concerns about restrictions on competition on some routes. This is because Eastar Jet has been in a state of capital erosion for quite some time and it is difficult to recover its reimbursement capability in a short period of time due to the aftermath of Corona 19 and other factors. Another reason for approval by the authorities was that it was difficult to expect the emergence of other operators who would take over Eastar Jet except Jeju Air. However, Jeju Air gave up its acquisition of Eastar Jet in July of last year despite approval of the merger.
In this regard, the Legislative Research Office predicted that the issue could be whether to view the negotiations with Asiana and HDC prefecture, which resulted in a’no deal’, as an’alternative with less competition restrictions’.
HDC Hyunsan and Kumho Industrial, who were the parties to the contract, are filing a lawsuit to return the deposit, claiming that the other party is responsible for breaking the Asiana acquisition contract. HDC’s side is that Kumho Industry rejected the request for additional due diligence to understand the business situation after Corona 19 and was destroyed. Although Kumho Industrial also announced its intention to cut the sale price, it refutes that HDC’s adherence to due diligence for 12 weeks is for the purpose of delaying the transaction.
It is said that the FTC’s existing ruling on whether the breakdown of negotiations due to refusal to request additional due diligence has not yet been confirmed. The report analyzed that “an issue that can be reviewed during the FTC’s review process”.
The Legislative Investigation Office said, “The sharp decline in demand and the uncertainty of a short-term rebound due to the spread of Corona 19 may be one of the factors to be considered, but there will be no change in the basis for the FTC to strictly maintain the criteria for exception recognition.”