In a dramatic turn of events for the aviation industry, the U.S. Department of Justice (DOJ) issued its last approval for Korean Air’s merger with Asiana Airlines on June 14, paving the way for the establishment of a new aviation giant in the Asia-Pacific region. The action marks the culmination of an extended review process and is a dramatic airline consolidation.
The transaction, valued at about $1.8 billion, will be to enhance competitive pressures in the aviation sector by attempting to satisfy escalating pressures of escalating cost of operations and changing consumer needs. Korean Air, South Korea’s largest airline, will purchase Asiana Airlines, the nation’s second-largest, to create a solid company that will make a noticeable presence in global as well as local markets.
“This merger will enable our airline to be more competitive and better equipped to serve customers’ needs, as well as the overall well-being of our economy,” said Merrick Garland, Attorney General of the United States. “After due consideration, we think that this merger will lead to better service and more value to consumers.”
The DOJ approval is accompanied by guarantees from Korean Air to maintain operations on routes and services currently offered by Asiana Airlines. Such a structure protects consumer choice and competition in the market. The merged carrier will experience the best of both carriers with expanded connectivity, enlarged route networks, and improved service levels for travelers.
Both operators have pledged to preserve core service attributes while integrating fleets and driving operating efficiencies. By integrating resources, they intend to rationalize operations and get rid of overlapping routes, leading eventually to enhanced profitability and quality of service across the board.
The merger was under regulatory review in the United States and other parts of the globe, with the primary focus being the possible impact on competition within the airline industry. As part of the agreement, Korean Air has committed to comply with certain conditions to prevent anti-competitive outcomes. These include maintaining competitive prices and fares on certain routes and increasing existing alliances with other airlines to offer more choice to consumers.
Industry analysts expect this merger to be the first of many consolidation moves in the airline sector, both globally and in Asia. “This merger could signal the beginning of a new wave of airline consolidations aimed at making airlines more resistant to economic swings and shifting industry trends,” stated Laura Smith, a SkyInsights aviation analyst.
The merger between Korean Air and Asiana Airlines is likely to provide a stronger base to battle large global carriers, especially with the recovery of demand for travel post-COVID-19.
While the air travel industry keeps seeking its legs post-pandemic, the DOJ approval for the Korean Air and Asiana Airlines merger not only resets the competitive landscape but also promises to bring tangible advantage to consumers as well as to the economy as a whole. As a larger, streamlined airline organization hangs over the horizon, all concerned parties look forward to the future direction of air transportation for the U.S. and the Asia-Pacific region.
