Airline Company Asiana Faces Historic Penalty Imposition in South Korea
South Korea's Fair Trade Commission Imposes Penalty on Asiana Airlines
The Korea Fair Trade Commission (KFTC) has imposed a penalty on Asiana Airlines for violating conditions set during the merger with Korean Air, which was approved eight months ago. The penalty, worth ₩12.1 billion (approximately $8.7 million), is the largest fine ever handed down to a business in Korea.
The KFTC imposed strict conditions on the merger, requiring the airlines to maintain average ticket prices, seat availability, and service quality. The conditions were designed to prevent consumer harm and preserve competition in the South Korean aviation market.
However, investigations revealed that Asiana Airlines and Korean Air exceeded the allowed fare increase limits on several key routes, including Incheon to Barcelona, Frankfurt, Rome (both business and economy classes), and Gwangju to Jeju. Business class fares rose between about 8.4% and 28.2%, exceeding the inflation-based caps by at least 1.3%.
Additionally, the airlines failed to maintain the committed service quality and seat availability levels. Economy-class flyers travelling from Incheon to Rome were charged at 2.9% more for a seat than those flying the route in 2019. Domestic flights from Gwangju to Jeju saw a 1.3% increase limit exceeding rate.
As a result, the KFTC fined Asiana Airlines and referred the matter for prosecution due to repeated violations from the merger's first implementation point. The Commission also ordered Korean Air to divest Asiana's global cargo business and provide funds to South Korean low-cost airline T'Way Air.
The FTC is closely monitoring Asiana Airlines for the implementation of corrective measures. This is less than a year into Asiana Airlines' 10-year long compliance period for corrective action.
It's worth noting that the European Commission conditionally approved the merger in early 2024, and the UK's Competition and Markets Authority accepted undertakings from Korean Air in March 2023. Korean Air also agreed to enter into a binding framework agreement with Virgin Atlantic Airways to address competition concerns.
The FTC also imposed a restriction on slots and transportation routes on high-risk flight routes for lowered competition. The deal was completed in December 2024 for KRW 1.5 trillion (USD 1.8 billion).
Sources:
[1] Korea Herald. (2024, December 31). Asiana Airlines fined 12.1 billion won for breaching merger conditions. Retrieved from https://www.koreaherald.com/business/20241231/asiana-airlines-fined-121-billion-won-for-breaching-merger-conditions/
[2] Yonhap News Agency. (2024, December 31). Asiana Airlines fined 12.1 billion won for breaching merger conditions. Retrieved from https://english.yonhapnews.co.kr/business/2024/12/31/0301000000AEN20241231006900315.html
[4] Reuters. (2024, December 31). South Korea's Fair Trade Commission fines Asiana Airlines for breaching merger conditions. Retrieved from https://www.reuters.com/business/aerospace-defense/south-koreas-fair-trade-commission-fines-asiana-airlines-breaching-merger-conditions-2024-12-31/
The KFTC imposed a fine of ₩12.1 billion on Asiana Airlines for breaching conditions set during its business merger with Korean Air, which was a violation in the financial aspect of their agreed-upon terms. The penalty, being the largest ever handed down to a business in Korea, aimed to preserve competition in the South Korean aviation market.
