By Kim Rahn
Staff Reporter
Asiana Airlines, the nation's second largest carrier, said it plans to invest in the budget airline services market this year, a move that will see fierce competition in the nation's burgeoning low cost air travel market.
Asiana announced Thursday that it will invest in Busan International Air as a major shareholder. Busan International Air is a budget airline set up by 12 Busan-based companies last August to launch the operation late this year.
The two carriers and Busan city signed a memorandum of understanding contract on the deal at Busan city hall. Among the participants are Kumho Asiana Group Chairman Park Sam-koo, Asiana President Kang Joo-an, Busan International Air Chairman Shin Jung-taek, and Busan Mayor Hur Nam-sik.
``Securing safety is the top priority. We will make sure that our service will be safe,'' Kumho Chairman Park told reporters after the signing ceremony. ``There are many things we should prepare. But we will try to launch the service as early as within this year.''
The agreement calls for Asiana to invest 23 billion won in the budget airline for a controlling stake of 46 percent. Busan City will invest 2.5 billion won. With the latest investment agreement, the budget airline's capital will rise to 50 billion won from 24.5 billion won. Asiana will exercise the management rights in picking board members and other key management issues.
The budget carrier will be able to take advantage of Asiana's know-how on airline management as well as get support in maintenance, ground handling, crew training and other infrastructure.
Benefiting from Asiana's support, Busan Air will be able to cut costs and provide stable service from the beginning of the operation, while Asiana will expand its business in the Busan region, Asiana said.
Asiana officials said unlike other budget airlines that offer cheap fares at the expense of other services, it will provide Asiana's quality and safe services at low rates.
Asiana will form a task force soon to work on details of business strategies, aircraft purchases, recruitment and license applications.
The new carrier will trigger fierce competition in the nation's low cost carrier market with five major airlines _ Jeju Air, Hansung Airlines, Air Korea, Busan International Air, and Incheon-Tiger Airways. Air Korea is a budget carrier unit of Korean Air, the nation's biggest airline.