Lee Hyo-sik is Finance Desk editor at The Korea Times. He manages finance-related stories on macroeconomics, banks, stocks, bonds, crypto etc. He is passionate about covering what's happening in Korea's financial industry and explaining it to both Korean and non-Korean readers. You can reach him at leehs@koreatimes.co.kr. Your insights and feedbacks are always appreciated.
Rivals oppose Asiana's 2nd budget carrier
By Lee Hyo-sik
Kim Soo-cheon Asiana Airlines CEO
By Lee Hyo-sik
Low-cost carriers (LCCs) here are opposing Asiana Airlines’ plan to set up its second budget carrier, according to the transport ministry and airline industry officials, Thursday.
The objection is widely expected as a newcomer into the highly competitive LCC market will likely fan excessive competition and put further downward pressure on budget carriers’ bottom lines.
Asiana Airlines, which already operates Air Busan based at Gimhae International Airport, is seeking to set up the second LCC based in Seoul, named Air Seoul, by March of next year.
On Oct. 19, Asiana submitted an application to the Ministry of Land, Infrastructure and Transport for a business license. After receiving the license, Air Seoul plans to lease Airbus 321-200 planes and operate on Asiana’s short-distance routes, connecting Korea with destinations in China, Japan and Southeast Asian countries.
However, Jeju Air, Jin Air, T’way Airlines and Eastar Jet have raised objections against Asiana’s plan, arguing that the newcomer will further fuel competition, damage their financial health and aggravate their global competitiveness.
On Oct. 22, the transport ministry asked the four budget carriers to submit their opinions on Air Seoul. The carriers all notified the ministry of their stance, expressing concerns that Air Seoul will make the already saturated LCC market go from bad to worse. They also said the presence of Korea’s sixth budget carrier will not help boost consumer benefits.
“We notified the transport ministry about what we think of Air Seoul. We believe that another LCC will only weaken the international competitiveness of domestic carriers,” a Jeju Air spokesman said. “In addition, Air Seoul will create excessive competition among carriers for pilots and maintenance personnel. It will further crowd Gimpo and Jeju airports. On these grounds, we oppose the creation of the new LCC at the moment.”
T’way Airlines also echoed Jeju Air’s views, saying that Air Seoul will not benefit consumers.
“What Asiana’s second LCC will do is take over unprofitable domestic and short-distance international routes from the mother company, which has been struggling to stay afloat,” a T’way Airlines spokeswoman said. “In this regard, we don’t think the presence of Air Seoul will benefit consumers in any way.”
The transport ministry will soon hold an ad-hoc committee to decide whether to issue a business license or not for Air Seoul.
“We will consider all the factors before making a decision,” a ministry official said. “We will first look at the airline industry’s supply and demand. We will also study whether Air Seoul will increase consumer interests, can operate flights safely and can generate profits, among other concerns.”