The entry of Qantas and Jetstar on the Sydney-Seoul route means there are no Australian competition issues with Korean Air and Asiana merging.
It has been nearly two years since Korean Air announced its plan to acquire Asiana Airlines. Yesterday another brick in the wall was added when the Australian Competition and Consumer Commission (ACCC) said it would not oppose the merger.
It may seem odd that an Australian regulator is involved in the merger of two Korean airlines, but the ACCC is just one of many. Competition watchdogs in nine countries are investigating if the merger will substantially lessen competition on routes in and out of their jurisdiction previously operated by Korean Air and Asiana Airlines. Unless the major regulators in the US, EU, China, Japan and the UK approve, much of the stored value in the merger will evaporate. The acquisition has been approved by South Korea, Turkey, Vietnam and Taiwan. Korean Air has also received approval from Singapore and Malaysia, where reporting is arbitrary, and the Philippines advised a report was unnecessary.
The Australian approval is a little surprising, given that Korean Air and Asiana are currently the only airlines operating the route between Sydney and Seoul. Asiana also codeshares with Singapore Airlines on flights between Singapore Changi Airport (SIN) and Perth Airport (PER), and the fate of that arrangement when the merger completes is unknown. Both Korean Air and Asiana operate cargo flights between South Korea and Australia. Air cargo is a highly competitive business, and merging these two South Korean carriers will not lessen what is a global market anyway.
In April, Qantas and Jetstar announced they would be launching direct flights from Sydney Kingsford Smith Airport (SYD) to Seoul Incheon International Airport (ICN) later this year. With both Jetstar and Qantas offering flights, passengers will have the choice of full-service business, premium leisure and low-cost travel options to South Korea. Qantas has not operated to Seoul since 2008 and will use its Airbus A330 aircraft when it resumes the route in December. Jetstar plans to launch the first low-cost direct flights from Sydney to Seoul on November 2, with the three weekly services on a Boeing B787-8 Dreamliner.
The entry of Qantas and Jetstar into the market is behind the ACCC's decision to approve the merger. In its determination, the ACCC's Chair Gina Cass-Gottlieb said that the acquisition would combine the only two current providers of direct flights between Sydney and Seoul, but Qantas and Jetstar will shortly be commencing services on the route.
"We consider that the Qantas Group offering flights on the Sydney to Seoul route with both its full-service and low-cost carriers means that there is likely to be effective competition whether or not the acquisition proceeds."
At IATA's June conference in Doha, Korean Air CEO Walter Cho said he expects to get approvals from the US and EU this year and that "everything should be done no later than the end of the year." Then the complex task of bringing the various airlines and their diverse fleets together will begin.
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Apart from Korean Air and Asiana, there are the low-cost carriers Jin Air, Air Busan and Air Seoul to consider. On that topic, Cho said, "If we merge together we will have four different aircraft with five different engines," and that the group is looking at simplifying that to one widebody type, one narrowbody and a smaller narrowbody, such as the Airbus A220, for domestic routes.
How do Korean readers feel about the merger of Korean Air and Asiana?
Journalist – A professional aviation journalist writing across the industry spectrum. Michael uses his MBA and corporate business experience to go behind the obvious in search of the real story. A strong network of senior aviation contacts mixed with a boyhood passion for airplanes helps him share engaging content with fellow devotees. Based in Melbourne, Australia.