Asiana could start low-cost carrier to boost profits

Asiana Airlines, Korea’s second-largest flag carrier, said it may launch a new Seoul-based low-cost carrier (LCC) following rapid growth in the LCC market.

According to the company, it is reviewing a business plan to set up an LCC that will fly from both Gimpo International Airport and Incheon International Airport.

With the appointment of new CEO Kim Soo-cheon at the start of this year, the air carrier also established a task force to find ways to increase its profitability, including by exploring the possibility of an LCC. If the new carrier is launched, it will be Korea’s sixth LCC. Asiana Airlines, which is an affiliate of Kumho Asiana Group, had an operating loss of 11.2 billion won ($10.7 million) last year.

“One of the assignments for the task force is checking whether establishing a new LCC will be helpful to the company,” said a spokesman for Asiana Airlines. “However, there are no details yet.”

Asiana already owns the majority stake in LCC Air Busan. It has a 46 percent stake, while the rest is owned by the Busan Metropolitan Government and companies from Busan.

Industry insiders speculate that although Air Busan has made a profit for the past four years, Asiana might be limited in its ability to expand the carrier to more routes because it is based out of the southern port city.

According to February data from the Ministry of Land, Infrastructure and Transport, Air Busan’s passenger volume was second in domestic flights and third in international flights out of five local LCCs, but its occupancy rate is at the worst in domestic flights (83.5 percent) and second worst in international flights (82.7 percent).

If Asiana establishes a new LCC, it is expected to focus on short-haul international flights and some domestic flights to Seoul, while Air Busan would maintain its place as the regional airline for southern areas.

By leaving short-haul flights to LCC affiliates, Asiana can push harder to transform itself into a long-haul premium airline. The air carrier already announced that it will begin operating Airbus A380 jumbo jets in June.

Korean industry observers said that Asiana’s plan to start an LCC is in line with defending the local LCC market against foreign companies. Last month, the Transport Ministry authorized new flights by four foreign LCCs - Spring Airlines, Hong Kong Express Airways, Vanilla Air and VietJet Air. They are joined by another six international LCCs - AirAsia X, AirAsia Zest, Cebu Pacific, Peach Aviation, Scoot Airline and Dynamic Airways.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]