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Virgin Atlantic agrees to launch Seoul flights to allow Korean / Asiana merger to proceed

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Virgin Atlantic has given binding agreements to the UK Competition & Markets Authority to launch flights to Seoul, as part of a deal to allow UK Government approval of the Korean Air and Asiana merger.

Subject to agreement by other national competition regulators, the merger can now proceed. 11 regulators have already approved the deal but some approvals are still pending. Progress on the deal has been slow, with the merger originally announced back in November 2020.

Flights are expected to launch during the Summer 2024 flying season which starts in late March 2024.

Virgin Atlantic agrees to launch Seoul

With British Airways not having flown to Seoul for a number of years, the prospect of the only two airlines offering direct services merging caused concern in the UK.

As well as fears that the 150,000 passengers who flew between London and Seoul annually pre-covid could face higher fares for direct flights, there was also concern that cargo pricing could increase and raise costs for British businesses who rely on Korean imports.

Korean Air has now entered into a series of undertakings – PDF here – to ease concerns.

What has Korean Air agreed?

Under the terms of the undertakings, Korean Air has agreed with Virgin Atlantic that it will operate flights to Seoul to compete with the merged Korean / Asiana.

Virgin Atlantic told us in a statement:

“Air passengers deserve a choice when flying. We believe that a fair and competitive market is essential for the aviation industry to evolve and thrive. We welcome the CMA’s decision regarding Virgin Atlantic’s role as the remedy taker in the Korean Air and Asiana merger, which will facilitate our entry into Seoul. We are excited to be appointed as the remedy taker to start flying to Seoul and will confirm our next steps in relation to a route start-up in due course.”

Here are the terms, as we understand it from the official documentation (E&OE):

  • Korean Air will provide Virgin Atlantic with slots at London Heathrow and Seoul Incheon to operate up to seven flights per week
  • The service must start within 12 months of the closure of the merger, or during the Summer 2024 flying season, whichever is later
  • Virgin Atlantic will be allowed to codeshare with Korean Air on the route
Virgin Atlantic agrees to launch Seoul
  • Virgin Atlantic will enter into a codeshare with Korean Air on its existing Seoul flights as soon as is practically possible, irrespective of whether other competition approvals have been received
  • Korean Air must allow Virgin Atlantic to codeshare on connecting Korean Air flights from Seoul, with a similar cargo agreement also being put in place. Again, this arrangement must be put in place ASAP and not when the merger finally completes.
  • Korean Air must allow Virgin Atlantic passengers to use its lounge in Seoul (this would happen anyway due to SkyTeam rules, but would be more important if Virgin Atlantic was replaced by British Airways)
  • Virgin Atlantic has agreed to operate the route for at least three years, albeit this is subject to ‘commercial viability’.
  • After three years, Virgin Atlantic would be allowed to keep the Heathrow (and indeed Incheon) slots it obtained from Korean Air and use them for other routes, although it cannot sell or lease them to another airline

In normal circumstances this could be an attractive deal for Virgin Atlantic. However, with the requirement to take detours to avoid flying over Russia, I am not sure that the economics are attractive at the moment given that this has historically been a low yielding route.

That said, the lure of getting hold of a Heathrow slot pair which is well timed for flights to Asia may be enough to convince Virgin Atlantic to stick it out for the required three years. If Virgin Atlantic then chose to use the slots to fly elsewhere, it could be a win for both sides with Korean Air gaining a monopoly.

If Virgin Atlantic withdraws from the agreement for any reason, Korean Air is obliged to find another airline to fly between the two cities. As British Airways – the only obvious alternative – would provide stiffer non-SkyTeam competition, I think it is safe to assume that Korean Air will do what is necessary – including financial assistance – to ensure that the Virgin Atlantic launch goes ahead.

You can download the full CMA adjudication as a PDF here.

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Comments (39)

This article is closed to new comments. Feel free to ask your question in the HfP forums.

  • Paul says:

    The Seoul London route can’t and won’t work for Virgin. It never worked for BA especially on point to point traffic. There just isn’t enough traffic and very little transfer traffic to VS in London.

    ICN is a mega Asian hub quite unlike Kimpo in the days when BA operated the route via HKG and packed the plane between SEL and HKG with massive groups at $399 return. This probably just covered BAs operating costs along with Cargo revenue but as soon as it went non stop the route didn’t last. The Korean crew were got rid of.

    BA went back briefly before covid but it was always marginal. You can imagine BA would also have been approached but have clearly said no.

    I fear there is more politics going on here than business sense!!

    • Rhys says:

      Much less competition now. No BA. No Asiana (presumably). Korean may decide to pull out if it codeshares with Virgin (including connections).

    • Rob says:

      Pretty sure BA was NOT approached. Why would Korean want to hand over its lounges and access to its frequent flyer scheme to BA, which would be a tough competitor? For a start, BA could offer onward connecting flights to Europe or elsewhere in the UK with no terminal changes, unlike Korean, Asiana or Virgin. Preferable for Korean to sweeten the deal with Virgin somehow to ensure they jump in.

      • Paul says:

        Actually BA didn’t have the EU/LHR transfer traffic either! KLM/Lufthansa and to a lesser degree Swiss were the go to airlines for Koreans travelling to Europe. They are long standing reliable partners, quite unlike BA who have withdrawn from the route at least twice and perhaps three times. The stooshy over the firing of the Korean crew was huge news in Korea and for a nation with such long memories and pride, was hugely damaging to BAs brand.
        Despite K pop and squid game I am not sure they are ready for the Virgin livery.
        What I perhaps hadn’t appreciated was that Korean / Asiana were either fully or partially withdrawing from the LHR route. That will help.

        • Peggerz says:

          @Paul Not seen Stooshy used on HfP before. Well done for its use, it brought a smile to my face….

    • MortonDill says:

      What about at the other end so VS pax connecting onto KE that was what BA never had? BA could only ever fill the plane with Europe to Seoul Pax as no one flys from Seoul to the US via Europe and they had no partner in Seoul either. That might be the difference for VS the onward connections ?

      • Mark says:

        Except that there are very few routes for which it would really make sense to fly from London via Seoul, especially given the situation with Russia over-flights. Japan, maybe some Chinese destinations but not much else.

      • memesweeper says:

        They could offer connections to SYD, for instance, with largely the same convenience as BA do via SIN.

        Assuming they could fly over Russia, of course.

        • Paul says:

          More so ( well at least when Russia was open. Seoul is on the great circle route from LHR to SYD. Incredible it was never exploited.

          • John says:

            All of Asia is on the great circle route to Sydney then. Seoul is 100 miles more than the shortest distance, but even Sri Lanka is only 300 miles (3%) more, although there are winds to consider. KE and OZ did/do compete on UK to Australia

  • Lady London says:

    A nice introduction of Virgin Atlantic aa they move into SkyTeam

  • Peggerz says:

    I have never been a VS flyer/ points collector but this may change my mind as one of my kids stays in Seoul. I used Avios to get there with QR last year, q-suites and all.
    It may be that, unless matters deteriorate and BA have to take on the route, I have to think about ditching the 2-4-1 journey I’ve just commenced and the Avios collection I participate in. Unless QR take the hint of course and allow us to use the 2-4-1 with them soon….

  • Peter says:

    So who will torpedo the merger for this Asiana Diamond? The EU? 😬

  • vlcnc says:

    I’m not sure I understand how it really provides competition given VS are part of Skyteam now as well as KE, and also will codeshare with their only other direct competition?? Although I guess it’s one of those routes that most people I suspect will connect for anyway at the many hubs in Europe or Asia on the way there as it is very well connected to those.

    • Rob says:

      Indeed. Obviously Virgin is the ‘soft’ option vs BA which is the only other realistic game in town.

      • vlcnc says:

        I am surprised iBA doesn’t see Seoul as an important destination but I have nothing to base that on but just impression that it feels like important world city these days in terms business and culture.

        • Paul says:

          Indeed it is, but then so is much of China, Indonesia, etc. the list of major cities BA has pulled out of in Asia is vast with 3 in Japan alone! TPE, SEL, MNL CGK KUL BKK all gone. The argument is that QR etc cover those routes but the truth is BA we’re always sniffy about the far east. Just before the first gulf war they had a manager in China who pushed water uphill trying to get them to serve BJS non stop daily along with Shanghai. LH already were even then but long term strategy was not in the DNA

          • vlcnc says:

            I do feel there is a little bit of racism in these decisions – does feel like BA receded into basically serving “white destinations” i.e. places mainly where white people go, with a particular concentrated focus on the transatlantic market and didn’t want to serve routes where there might be a more divers passenger base. A far cry from the very outward gestures of being a world airline with the “the world’s favourite airline” tag they ran with in the late 90’s.

          • Rhys says:

            I think you may be reading into something that isn’t there. I imagine BA is going to wherever the money is. Obviously, America is a richer country than Thailand or many other Asian destinations.

            One of the issues is that BA is both slot constrained and aircraft/crew constrained. The latter it has some influence on, but it can’t easily increase the number of slots it holds at Heathrow without Heathrow expansion, which it has no control over. So it flies the planes where they make the most money.

            With regards to Seoul, BA was up against not one but two home carriers, plus the usual ME3 for connecting passengers. So it wasn’t exactly an underserved route.

          • vlcnc says:

            Perhaps you are right Rhys- it was something my brother posited as he felt BA staff maybe didn’t like serving certain destinations that were a bit less polished. It has felt a bit strange as growing up it felt like BA went everywhere but not anymore and yes that is because the market has changed so much with a lot more high-quality competition going east than there is west. I was intrigued to read recently that BA were thinking of returning to Dhaka in 2020 with 787 service which was surprising so maybe they are constantly looking at markets again if they think they can make it work commercially.

          • Rhys says:

            I think BA staff would love it if BA returned to Bangkok and other cities in Asia – a lot of these are popular holiday destinations after all!

  • pigeon says:

    Okay, so is Korean Air going to underwrite VS’s losses for 3 years, and when these 3 years are up, the Seoul flight goes, and VS gets a pair of slots, which they can e.g. use for another Atlanta service?

  • Dev says:

    Cue identical priced fares on both VS and KE, and how is the supposed to provide more competition when both are in the same alliance and codeshare with each other?

    • Benilyn says:

      I am a noob here but I guess more supply of flights, assuming same demand, prices have to /logical to fall?

      • John G says:

        Except this will probably just replace the existing Asiana flight, so no extra capacity.

  • ChasP says:

    I also fail to see how a codeshare gives competition
    However it does mark the start of a profitable new Virgin enterprise – Horse trading !

    • Nick says:

      Codeshares are not joint businesses, no revenue (or cost) sharing is allowed. Pricing has to remain independent and not co-ordinated. Plenty easy to retain competitive while codesharing.

      This is of course entirely compatible with Rob’s statement of VS being the ‘better’ option for KE though. Much better to have a friend operate than a foe. The lounge can be dressed up as a benefit that would have happened with SkyTeam anyway.

      If they can have sensible connections it might just work out. Pusan is where the business money is… BA had a train connection (with through fares) for a while, but the company stopped serving ICN, only the city centre, and no other airlines interlined properly with them. Add a decent timed connection to AKL (KE flies direct) and bingo, VS has a market. Will take effort, but it could be a good move for them.

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