After significant delay Asiana’s board has voted 3 to 1 with a single abstention to move forward with its Korean Air merger, first announced in 2020. At the time it wasn’t clear whether Asiana could survive on its own. Now it’s profitable. This will consolidate the two significant Korean airlines, and concentrate the Seoul market – and between Seoul and many key destinations like Los Angeles and London.
Since Delta – which isn’t just in an anti-trust immunized joint venture with Korean but also owns a substantial stake in the carrier also controls Virgin Atlantic – Virgin agreed to launch London Heathrow – Seoul for its summer 2024 to… alleviate competition concerns when Korean and Asiana were no longer competing with each other.
Virgin has not added the flight to its schedule. They don’t want to do it for the route’s sake. It only happens if the merger gets approved.
European, Japanese, and U.S. regulators haven’t signed off on the merger. There’s some belief that Asiana divesting its cargo business will appease the Europeans though this seems odd. The Japan – South Korea market seems reasonably competitive, with half a dozen carriers besides Asiana and Korean flying Tokyo – Seoul and five other carriers serving Osaka – Seoul (as well as activity on other routes).
Competition between the U.S. and South Korean, however, becomes largely non-existent with this deal.
- It’s effectively a tie-up between the largest U.S. carrier to South Korea (Delta) and the two large South Korean airlines.
- American Airlines operates a single Dallas – Seoul flight and United has a couple of San Francisco flights.
- Air Premia flies 6 days a week to Los Angeles and 4 to Newark. They are operating Honolulu service over the winter, which Hawaiian also flies.
The U.S. and South Korea have an Open Skies agreement. U.S. airlines can enter the South Korea market largely without restriction. As a result, I don’t see a competitive issue here. United and American can add flights here if they wish, and if the Asiana – Korean combination raises fares they might do so!
However that’s not the basic approach that the Biden administration takes to competition. Any concentration is enough to draw their ire, even when it’s smaller airlines getting together to become stronger against incumbent players (see American-JetBlue, JetBlue-Spirit). Perhaps, though, the Biden administration only does it when it resonates domestically – we’ll see.
Tim Dunnce will tell you since this isn’t between a LCC and ULCC it’s 100% ok to do this.
thanks for the update on the Asiana board vote.
Last I heard was that the Korean Development Bank is believing that the merger won’t be approved; they have lots of money not just in Asiana but also in Korean Airlines so they have alot to lose. They actually helped orchestrate the merger in the first place.
I’m not convinced the vote today means anything in terms of getting the US or EU to approve it. It is absolutely true that DL holds equity in so many players that they will benefit.
You accurately note that S. Korea has long had Open Skies and they have honored their commitment to provide slots in return for Open Skies; the joint venture w/ DL is actually quite young but creates a larger JV than AA or UA have w/ their Japanese JV partners which do not offer near as much opportunity for competitors as the US and S. Korea offer.
DL has said it will be announcing new flights to S. Korea soon so I suspect all of this is one big orchestration for PR effect.
It is doubtful that S. Korea and most East Asian countries can support two viable global carriers like Japan does.
The difference – in contrast to what WN tried to do at Dallas Love Field – is that DL doesn’t block competitors in order for DL and its partners to succeed.
again, good article, Gary
Come on Gary, Delta has always been so altruistic in their partnerships where everyone wins… Oh wait, that’s 100% wrong. Delta is a bully of truly impressive magnitude and makes no secret of their disdain for customers and competitors.
seriously?
Tell us what competitors can’t get access to DL’s hub airports (I can’t wait to hear the flimsy attempts) or how many NET elite passengers Delta has lost or that Delta consistently ranks at the top of the DOT’s Air Travel Consumer Report.
competitor fankids w/ sour grapes? No shortage of those for sure
Nah, I’d rather have multiple alliance options for S. Korean airlines rather than just 1.
@Christian – yepp, anyone who follows aviation industry news seriously can see it
Adding capacity from one JV so that another JV can gain monopolistic advantages in their home market is brilliant. The policies of the Biden administration indicate no real understanding of commercial aviation.
Tim, DL’s hubs in LGA and JFK are slot restricted with limited access.
and the DOT has provided more access to US slot restricted airports than any other country. You do realize that JetBlue is willing to trade away Spirit’s NYC access in order to get its merger through. Not sure if it is still the case but Spirit has used, wait, wait, Delta’s terminal at LGA.
Slot restricted does not mean competitors don’t have access to or the ability to gain access to airports.
And the point, in case you missed it, is that Delta had to engage in a nearly 10 year legal battle to be able to continue to serve Dallas Love Field – and they won.
Comment: Delta – the world’s only PERFECT airline.
Question: How many domestic airlines does a country the size of South Korea really need?
no, Delta is not perfect
They do have some of the best strategists in the industry. Anywhere.
And they play the long game in a world where many airline execs and even more internet aviation fan kids are far too quick to rush to judgment.
Delta will have a much larger presence in Seoul and the combined DL/KE Japan/S. Korea/China network will be industry leading, as much as some want to pound their chests and proclaim their own dominance.
I hope that the merger doesn’t affect flights by the combined Korean Air and Asiana. I just flew on Asiana yesterday and the flight was great. I have no intention of flying across the Pacific on Delta.
And so is London with AA, Frankfurt and United, Amsterdam and Delta… plenty of airports and indeed entire countries are dominated by alliances and partner airlines. Seoul has always been a Skyteam haven and Asiana can’t keep up with Korean- so now the big fish is eating its weaker rival. Nothing new here everyone, just business as usual.
correct, TWAviator
and to add, the Korean government bailed out their airlines – both Asiana and Korean – both of which are part of huge conglomerates – but Asiana is so deeply in debt that they can’t make money when factoring in all of the debt service and fleet replacement that they have to do.
The Korean Development Bank which loaned them all that money is who orchestrated that merger because they see a merger as the best chance of getting their money back, whatever the impact to competition.
So let’s dispense with the notion that Delta is pulling the strings on eliminating competition. Korean and Delta just happen to have a joint venture that can lift Korean aviation to a global scale like the joint ventures in Europe and Japan.
S. Korea is geographically well-positioned to serve as a connecting hub between the Americas and E. Asia – second only to Japan – but Japan’s two airport Tokyo policy is crippling the ability of either Tokyo airport to become as large as they could be.
There is a very real possibility that Delta and Korean on a combined basis will be larger than American or United plus their Japanese JV partners across the N. Pacific. The Chinese have decided that there will be limited capacity to China so DL and UA are the same size to China which eliminated a large part of UA’s size advantage across the Pacific. It will be up to what UA serves in TPE and south that provide UA with a size advantage.
add in that DL will buy a larger new generation widebody – either the A350-1000 or the 787-10 – and the size gap between DL and UA across the N. Pacific will narrow in the coming years.
Huh? Seems like a little of a run-on paragraph here:
“Since Delta – which isn’t just in an anti-trust immunized joint venture with Korean but also owns a substantial stake in the carrier also controls Virgin Atlantic – Virgin agreed to launch London Heathrow – Seoul for its summer 2024 to… alleviate competition concerns when Korean and Asiana were no longer competing with each other.”
I mean, I get it, but a little proof reading wouldn’t hurt.
Bollocks
This makes no sense :
Since Delta – which isn’t just in an anti-trust immunized joint venture with Korean but also owns a substantial stake in the carrier also controls Virgin Atlantic – Virgin agreed to launch London Heathrow – Seoul for its summer 2024 to… alleviate competition concerns when Korean and Asiana were no longer competing with each other.
Poorly written, confusing and messy ..