- Non-compliance with fare-related remedies imposed in the Korean Air–Asiana Airlines merger -
- Imposition of a KRW 12.1 billion enforcement penalty and referral of the corporation to the prosecution -
The Korea Fair Trade Commission (Chairman Han Ki-jeong, hereinafter the “KFTC”) has decided to impose an enforcement penalty and refer Asiana Airlines Co., Ltd. (hereinafter “Asiana Airlines”) to the prosecution for violating a remedy condition imposed as part of the approval of its merger with Korean Air. Specifically, the violation concerned the measure prohibiting seat fare increases beyond the designated limit.
The “enforcement penalty system” is a monetary sanction imposed when a company fails to comply with remedies attached to a merger approval designed to address competition concerns.
The Korean Air–Asiana Airlines merger was filed in November 2020, received its first approval on May 9, 2022, and was finally approved on December 12, 2024, after reflecting reviews by overseas competition authorities and changes in the airline market.
When approving the merger, the KFTC imposed both structural and behavioral remedies on 26 international routes and 8 domestic routes deemed to have high anticompetitive risks. Structural remedies required the transfer of slots and traffic rights on certain routes to other airlines. Behavioral remedies included: a prohibition on increasing the average seat fare beyond a designated limit, a ban on reducing seat supply, and obligations to maintain the quality of core services such as seat pitch and free baggage allowance.
Slots refer to departure or arrival times allocated to airlines by aviation authorities, which grant the right to use airport facilities at the designated time. Traffic rights refer to an airline’s right to operate flights to specific countries.
In particular, the “prohibition on increasing average seat fares beyond the designated limit” restricted airlines from raising fares above the level of the 2019 pre-COVID average fare plus inflation. For example, on a route subject to remedies, the average fare in the first quarter of 2025 could not exceed the “Q1 2019 average fare + cumulative inflation rate.”
However, through its Q1 2025 compliance review, the KFTC confirmed that Asiana Airlines exceeded the permissible fare increase limits on four routes:
- Incheon–Barcelona (business class),
- Incheon–Frankfurt (business class),
- Incheon–Rome (business and economy class), and
- Gwangju–Jeju (economy class).
The excess ranged from at least 1.3% to as much as 28.2%.
The prohibition on excessive seat fare increases is a core measure to prevent airlines from abusing their enhanced market power following the merger. Nonetheless, Asiana Airlines failed to comply from the very first period of implementation.
Accordingly, the KFTC imposed an enforcement penalty of KRW 12.1 billion and, considering the seriousness of the case, decided to refer the corporation to the prosecution.
This penalty is the largest ever imposed under the merger enforcement penalty system since its introduction. It is expected to heighten corporate awareness and strengthen deterrence against future violations.
The compliance period for remedies imposed on the Korean Air–Asiana Airlines merger is 10 years (end of 2024–end of 2034), and the KFTC announced it will continue to monitor implementation closely.