Asiana Airlines (OZ, Seoul Incheon) management will submit an application to the South Korean Ministry of Land, Infrastructure and Transport to establish a second Low Cost Carrier which, it says, will offer flights out of Seoul Gimpo and Seoul Incheon airports.
Airline officials who spoke to the Korea Times on condition of anonymity said Asiana would hold a controlling stake in the budget carrier unlike with Air Busan (BX, Busan) where it holds a 46% shareholding. Control would allow Asiana to better manage the airline according to its requirements while sharing in its expertise.
In terms of operations, once certification is complete, hopefully by year-end, the carrier will likely assume some of Asiana's loss-making international routes to Japan.
"While we make profits from popular routes linking Korea and big Japanese cities including Tokyo, Osaka Kansai and Fukuoka, we have low occupancy rates for smaller cities. If the budget airline operates on such routes, it will be win-win for both Asiana and the budget carrier," the source said.
The project, however, has seen intense resistance from Air Busan shareholders afraid that it may cannibalize their existing traffic. Asiana has reportedly proposed that Air Busan takes on a 44% minority shareholding in the company, a move that was rejected during consultative talks held last year.
Asiana's decision to push for a new carrier has been greeted with some consternation by industry analysts who fear a new LCC will only lead to more market saturation. The airline, however, insists the new project will compliment its operations with Asiana remaining a premium service provider; Air Busan a local carrier operating routes linking Busan and the new budget carrier which will offer low-cost flights out of Seoul.
Presently, South Korea is home to five LCCs namely: Air Busan, Eastar Jet, Jeju Air, Jin Air (owned by rival Korean Air) and t'way Air.
