- Consideration of foreign reviews and post-COVID stabilization leads to revisions in remedial measures.
- Plan to closely monitor the implementation of remedial measures, including mileage programs and airfare, to prevent consumer harm.
The Korea Fair Trade Commission (hereinafter referred to as the “KFTC”) has decided to revise and specify parts of the remedial measures related to the merger between Korean Air Co., Ltd. and Asiana Airlines Co., Ltd. (hereinafter collectively referred to as the “Parties”) in consideration of the completion of foreign competition authorities' reviews and the end of the COVID-19 pandemic.
When granting conditional approval in May 2022, the KFTC anticipated that various remedial measures might be imposed by foreign competition authorities. It also left room to modify the remedial measures later through a plenary meeting to reflect the outcomes of foreign reviews. At that time, the KFTC imposed a “prohibition on seat supply reduction” measure but deferred setting specific standards due to uncertainties regarding the pandemic’s impact on the aviation market.
Recently, the European Commission (EC) and the U.S. Department of Justice (DOJ) finalized their reviews of the merger, marking the completion of pre-merger reviews in 14 jurisdictions, including South Korea. Moreover, with the World Health Organization (WHO) declaring an end to the COVID-19 pandemic in May 2023 and the aviation market regaining stability, the KFTC convened a plenary meeting on December 11, 2024, to review and revise the remedial measures accordingly.
Details of the Revised Remedial Measures
1. Reflecting Foreign Competition Authorities’ Decisions
The KFTC’s original remedial measures required the Parties to return air traffic rights and slots to facilitate the entry of alternative airlines after the merger. However, considering the EC’s and DOJ’s measures, some routes already have new entrants operating before the merger date:
- In Europe, T’way Airlines has been operating four routes since August 2024 as part of the EC’s measures.
- In the U.S., Air Premia has started operating five routes as an alternative carrier in collaboration with the DOJ.
The KFTC acknowledged these operations as meeting its own remedial conditions. This adjustment aligns the KFTC’s enforcement approach (post-merger compliance) with that of the EC and DOJ (pre-merger compliance), ensuring no substantial difference in the effectiveness of compliance.
2. Clarification of Seat Supply Measures Post-COVID
Initially, the KFTC prohibited the Parties from reducing seat supply on 40 routes of competitive concern below an “unspecified percentage” of 2019 levels. Given that the aviation market has recovered over 90% of its pre-pandemic levels by the first half of 2024 (based on seat supply, passenger volume, and fleet capacity), the KFTC set the seat supply reduction threshold at 90% of 2019 levels.
For instance, if the Parties supplied 10,000 seats annually on a specific route in 2019, they must now provide at least 9,000 seats annually post-merger.
3. Entrusting Monitoring to the Korea Fair Trade Mediation Agency
Following the June 2023 amendment to the Fair Trade Act, the KFTC can delegate certain compliance monitoring tasks to the Korea Fair Trade Mediation Agency (the “Mediation Agency”). This delegation ensures effective oversight of extensive remedial measures, including:
- Prohibiting airfare increases beyond inflation rates.
- Maintaining at least 90% of pre-merger seat supply on the 40 identified routes.
- Preventing adverse changes to mileage programs.
The Mediation Agency’s involvement is deemed essential for the KFTC to monitor compliance effectively, in collaboration with the Ministry of Land, Infrastructure, and Transport (the “MOLIT”).
4. Establishment of a Compliance Monitoring Committee
The Parties must establish a compliance monitoring committee within 90 days of the merger date (December 12, 2024), in consultation with the KFTC. The KFTC plans to work closely with MOLIT to form an independent and specialized committee to oversee compliance in aviation and consumer matters.
With the revision and specification of remedial measures, the merger review process that began in January 2021 concludes after nearly four years. Given the public interest surrounding this case, the KFTC will rigorously monitor post-merger activities to prevent excessive airfare increases, seat supply reductions, and adverse changes to mileage programs. The KFTC will also cooperate closely with MOLIT to ensure no consumer harm arises.