Asiana Airlines, South Korea’s No. 2 airliner, is poised to set up its second low-cost air carrier this year, company officials said Monday.
“We plan to establish the Incheon-based air carrier within this year,” Asiana Airlines’ spokesman Moon Sung-uk said.
Tentatively named “Seoul Air,” the carrier will focus on less profitable short-haul routes that Asiana currently operates.
Travelers walk past the Asiana Airlines Inc. Asiana Club counter as other travelers stand in line at Incheon International Airport in Incheon. (Bloomberg)
The group initially announced its plan to launch the budget carrier last year but was hindered by opposition from shareholders of its existing LCC, Air Busan.
Kumho Asiana Group signaled progress in the plan through a recent personnel reshuffle carried out on March 1.
The group promoted Ryu Kwang-hee, senior managing director and head of Asiana Airlines’ passenger division, to Seoul Air’s chief executive officer.
“With the establishment of Seoul Air, improved earnings are expected as the LCC can increase its margin by operating those routes showing low profit on the full-service carrier,” he said.
“Seoul Air will operate international routes only, not domestic ones,” he added.
Air Busan, a Busan-based budget airline that is 46 percent owned by Asiana, has been a second-tier contender to Jeju Air and Korean Air affiliate Jin Air.
“All of Air Busan’s flights are to or from Busan, and Asiana doesn’t operate any of those routes, which means the new LCC’s routes won’t clash with Air Busan’s,” he said.
According to industry sources, it will take about a year for the new LCC to operate its first flight after recruitment, basic structure organizing and aircraft purchase.
Asiana Airlines has not yet applied for an air transportation business license to the Ministry of Land, Infrastructure and Transport.
In February, Asiana Airlines announced a $2.83 billion order for 25 planes from Airbus Group, weeks after returning to profit last year.
Asiana’s move to set up the second budget carrier is in line with the LCC industry’s rapid growth.
Korean airlines carried 8.14 million passengers last year, up 11 percent from a year earlier, transport ministry data showed. Of that, budget airlines carried around 23.3 percent, more than double its share in 2009.
The country’s largest budget carrier Jeju Air posted 510.6 billion won ($486.2 million) in sales, up 18.1 percent on-year. Other four local LCCs -― Jin Air, Eastar Jet, T’way Air and Air Busan ― have begun their turnarounds in operating profit in recent years.
Responding to skepticism that the local LCC industry is saturating, the official said Seoul Air wouldn’t compete with local budget carriers.
“It’s a global trend for full-service carriers like Singapore Airline and All Nippon Airways to have a low-cost affiliate carrier. We are launching a competitive budget airline in the world market,” he said.
By Park Han-na (hnpark@heraldcorp.com)