Korean Air Says No Collusion On Incheon-Ulan Bator Route

SEOUL (Dow Jones Newswires) – Korean Air Lines Co. (003490.SE) said Tuesday it isn't involved in any collusion with Miat Mongolian Airlines on the Incheon-Ulan Bator route, refuting allegations by the South Korean antitrust regulator.

South Korea's Fair Trade Commission Monday ordered the two airlines to correct unfair practices on the route, saying they have been colluding since late 2005 to prevent competitors from serving the route between the two cities in South Korea and Mongolia.

"In a move to influence talks on aviation between the two countries, Korean Air has offered incentives, including trip costs, for Mongolian government officials in charge of aviation talks with Korea, their families and relatives," Yoon Soo-hyun, director of the FTC's International Cartel Division, said.

As a result, South Korea hasn't been able to get Mongolia to agree to allow other airlines such as Asiana Airlines Inc. (020560.SE) to start flying on the Incheon-Ulan Bator route, the FTC said in a statement.

Korean Air and Miat Mongolian Airlines have charged higher rates for the Incheon-Ulan Bator route compared to other routes of similar distances operated by other airlines, said the FTC statement. As such, customers travelling on the route have to pay higher ticket prices and while fewer flight options due to the dominance of the two airlines mean there are limited seats each summer, it said.

The FTC's order is legally binding and under Korean law, any company or person found guilty of collusion may face jail time of up to two years or fine of KRW150 million ($130,000), or both, Yoon said.

In response, South Korea's flag carrier said in a statement: "The failure of the bilateral aviation talks is due to differences in position of the two governments," not due to the intervention of an airline.

Korean Air added the data provided by the FTC regarding rates and load factors don't reflect a bigger picture.

"The annual average load factor of the Mongolian route is similar to other international routes and the pricing for flights between Incheon and Ulan Bator is not considered high compared to other airlines operating over similar distances," a Korean Air spokeswoman said. "It is common there are fewer seats on major routes during the peak summer season."

Smaller rival Asiana Airlines said the South Korea-Mongolia aviation talks should focus on promoting convenience for travellers flying between the two countries by opening up the market to more airlines.

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