Korean Air to Launch Low-Cost Airline Unit for International Routes

Korean Air Co., South Korea's largest airline, said Monday it would launch a low-cost airline

unit in May next year, joining the competition between Asian budget carriers to lure passengers in the region.

The unit, tentatively named Air Korea, will offer only short international routes to Japan, Thailand and Malaysia, an official at Korean Air said.

Last week, the board of Korean Air approved the plan to set up the budget airline unit with a paid-in capital of 20 billion won ($21.5 million), the official said on condition of anonymity.

"We expect the government to grant a license for the budget airline unit," the official said, adding the company would submit an application to get the license.

In the first stage, Korean Air will operate the budget airline unit with three Airbus 300s and two Boeing 737s, the official said.

However, the Ministry of Construction and Transportation, which is in charge of supervising airlines, has said it would award an international route license for a budget airline unit of Korean Air if the low-cost carrier operates domestic routes first.

"The government's basic stance is that an airline should first operate domestic routes and then be allowed to operate international routes," said an official at the ministry.