Korean Air and Asiana Airlines passenger planes at Incheon International Airport. yunhap news
– Korean Air’s merger and acquisition (M&A) of Asiana Airlines has crossed the ‘9th Division’. At the extraordinary general shareholders’ meeting on the 6th, Korean Air passed an amendment to the articles of association to increase the total number of issued stocks. With the revision of the articles of incorporation that day, Korean Air will be able to proceed with the paid-in capital increase scheduled for March. However, the last gateway is difficult. The Fair Trade Commission, the’M&A judge’, has left the business combination review.
Korean Air plans to submit an Asiana Airlines business combination declaration by the 14th. They are optimistic about the results themselves. Woo Ki-hong, president of Korean Air, said, “If the two companies are integrated, we can achieve’economy of scale’ by becoming the top 10 airline in the world, and greatly improve cost competitiveness.” “In the past, numerous airlines have conducted mergers and acquisitions (competitive There are very few cases where the authorities have not approved a business combination.”
–
Fair Trade Commission. Newsis
– When the FTC examines a business combination, the focus is on whether there is a monopoly factor in the merger of the two companies. Specifically, it is questioned whether there is’competitive limitation (more than 50% market share)’. In addition to the two companies, the market share of the low-cost airlines (LCC) of the two companies, Jin Air, Air Seoul, and Air Busan, reached 66% as of 2019. The cargo market share is higher.
In terms of numbers, it is monopoly, but if the’consumer welfare’ is greater, it may not be judged as monopoly. Alternatively, the combination may be approved as a condition for the sale of business rights on routes that are subject to monopoly.
Even if there are concerns about restricting free market competition, there is a possibility that the takeover is legitimate. This is the case when Asiana is in a state where it is impossible to recover, that is, it has fallen into insolvent or is likely to become so soon. An attorney in charge of fair trade at a large law firm, who requested anonymity, said, “Korean Air can take over Asiana’s facilities and manpower and continue to use it, and it can approve the merger and acquisition taking into account a number of factors, such as when it judges that an alternative buyer is not appropriate. I said.
There is also a precedent. In April of last year, the FTC approved Jeju Air’s Eastar Jet merger despite concerns about restrictions on competition on some routes. It took into account the fact that Eastar Jet is in a state of capital erosion, it is difficult to pay off debts in a short period of time, and that there is no suitable alternative to Jeju Air as a takeover.
M&A between large airlines is not uncommon in the global aviation industry. Rather, there is a trend of reorganizing into one large airline system per country. Air France and KLM in 2004, American Airlines and US Airlines in 2005, Delta Airlines and Northwest Airlines in 2008, British Airways (BA) and Iberia Airlines in 2009, and United Airlines and Continental Airlines in 2010, etc. approved mergers and acquisitions. Take it and sang it. “The two airlines compete with LCC on domestic flights and fierce competition with foreign airlines on international flights,” said Kim Byeong-jong, a professor at the Department of Aviation Transportation and Logistics at Korea Aviation University. “It is better to merge and create synergy to increase the global competitiveness of the aviation industry.”
Concerns about “concerning the monopoly of each route”
–
–
Cho Sung-wook Chairman of the Fair Trade Commission. News 1
– However, the outcome is unsafe. It is because the chairman of the Fair Trade Commission Sung-wook Cho, who has been inaugurated in 2019 and has been in his third year, is continuing the strict business combination screening process according to the principle. Immediately after taking office, Chairman Cho did not hand over the merger of CJ Hello by LG Uplus and Tbroad by SK Broadband, but approved the’conditional acquisition’ one after another. Recently, they ordered Delivery Hero (DH), which tried to take over the people of delivery, to sell Yogiyo instead of taking over the people of delivery.
The National Assembly Legislative Research Bureau revealed concerns about the monopoly over Korean Air’s Asiana merger and acquisition in a report entitled’Issues and Issues related to M&A of Large Airline Companies-Major Issues in the FTC’s M&A Review’. Kang Ji-won, an investigator at the National Assembly Legislative Investigation Department, said, “Not only the share of the entire route, but also concerns about the monopoly of each route connecting each city at home and abroad must be considered.” There may be,” he pointed out. In addition, he added, “The decrease in air demand due to the novel coronavirus infection (Corona 19) is a consideration for screening, but is not a reason for weakening the screening criteria.”
Even if it is approved by the FTC, examination by foreign competition authorities remains. At least five countries, including the United States, the European Union, China, and Japan, must also go through a business combination examination. In particular, the key issue is the EU examination, where monopoly regulations are strict. The US-EU fair competition authorities announced last year that “regardless of the situation of Corona 19, we will strictly judge whether the acquired company cannot be rehabilitated in the business combination examination.”
Lee Sung-gyu, head of the business consolidation section of the Fair Trade Commission, said, “When admitting an exception in the business consolidation screening, the reasons must be specifically looked at and the conditions are strict.” Said.
Sejong = Reporter Kihwan Kim [email protected]
–
