(C) Aviation A2Z

SEOUL — The merger process between South Korea’s two largest carriers, Korean Air and Asiana Airlines, has encountered significant turbulence as the nation’s antitrust regulator ramps up pressure over compliance failures. The Fair Trade Commission (FTC) announced on Monday that it has imposed a combined "performance command fine" of KRW 6.46 billion (approximately USD 4.8 million) on the two airlines for violating conditions set during the approval of their business combination.

Penalties for Strategic Seat Reductions

According to the FTC, the airlines failed to adhere to a corrective measure mandated during the merger approval process, which prohibits reducing seat capacity below 90% of 2019 levels. Specifically, on the Incheon-Frankfurt route between December 2023 and March 2024, the combined seat supply fell to only 69.5% of pre-pandemic levels—a 20.5 percentage point drop below the legal requirement.

Individually, Korean Air was fined KRW 5.88 billion, while Asiana Airlines was hit with KRW 580 million. The FTC views these seat reductions as a "stealth" method of increasing fares by restricting supply, bypassing direct price caps. This follows a record-breaking KRW 12.1 billion fine imposed on Asiana Airlines in August for exceeding average fare increase limits. Total cumulative penalties and consumer restitution costs related to these violations have now reached KRW 21.71 billion.

Rejection of Mileage Integration Plan

Beyond capacity issues, the FTC has also ordered a comprehensive overhaul of the proposed mileage integration plan. While the airlines previously suggested a 1:1 conversion ratio for flight miles and a 1:0.82 ratio for credit card-affiliated miles, the regulator deemed the plan insufficient in protecting consumer rights.

The FTC highlighted a critical lack of specific measures regarding "bonus seat availability" and "seat upgrade services." Consequently, Korean Air has been ordered to submit a revised plan within one month that expands the practical use of miles for consumers. This marks the second time the integration proposal has been rejected, following a previous dismissal in June due to concerns over conversion ratios.

Long-term Regulatory Oversight

Industry analysts interpret these consecutive sanctions as a stern warning from the government. Since the merger’s corrective measures are slated to remain in effect until 2034, the FTC signaled that it will maintain a zero-tolerance policy toward any attempts to exploit market dominance at the expense of passengers.

"We will continue to rigorously monitor compliance to ensure that the merger does not lead to a degradation of consumer welfare," a spokesperson for the FTC stated. In response, Korean Air announced it would carefully review the official resolution once received and determine its future course of action and legal strategy.