WASHINGTON/SEOUL (Reuters) -The U.S. Justice Department is considering suing to block Korean Air's planned acquisition of Asiana Airlines, Politico reported on Thursday.
The U.S. Department of Justice has been investigating the November 2020 deal for roughly two years, and is concerned that it will hurt competition on overlapping routes to the United States, the report said citing three people with knowledge of the deliberations.
In response to the report, Korean Air said the Justice Department had not made any official decision, adding the South Korean airline would continue its dialogue with the U.S. government until a final decision is made.
"Korean Air has made, and continues to make, every effort to obtain all necessary approvals," the company said in a statement to Reuters.
A Justice Department spokesman declined to comment.
The U.S. administration is concerned the merger would place too much control of cargo transportation of key goods like microchips in the hands of one company, the report said, adding that no decision has been made on whether to bring a case.
EU antitrust regulators said on Wednesday that Korean Air Lines' proposed acquisition of rival Asiana may restrict competition in passenger and cargo air transport services between Europe and South Korea.
The merger between South Korea's no.1 and no.2 airlines would see Korean Air become the biggest shareholder in indebted Asiana. The deal was arranged by Asiana's creditors led by state-run Korea Development Bank in 2020.
Analysts said it was too early to tell what the U.S. and EU would decide, however South Korean regulators approved the merger on condition that the combined firm gives up flights to other airlines on routes where it has a large market share.
A similar condition was flagged by the UK'S competition authority when it approved the merger in March, analysts added.
"The merger will be good for cost-cutting and economies of scale, but there is also reduced market share expected from regulators' requirements," said Seho Bae, analyst at HI Investment & Securities.
The Biden administration has taken a hard line on airline consolidation.
In March, the Justice Department filed suit to stop JetBlue Airways (NASDAQ:JBLU) Corp from buying Spirit Airlines (NYSE:SAVE) Inc, saying the planned $3.8 billion merger "will lead to higher fares and fewer seats, harming millions of consumers on hundreds of routes." Trial is set for October.
The department also sued asking a judge to force JetBlue and American Airlines (NASDAQ:AAL) to scrap their Northeast Alliance. The companies are awaiting a decision after a trial last year.