Asiana Airlines

British Airways resumes Seoul service with more Asian destinations to come as BA integrates bmi

British Airways is making one of its first significant network changes following the acquisition of bmi (by parent company International Consolidated Airlines Group) with the Dec-2012 resumption of services to South Korea's Seoul, which BA last served in 1998. BA will operate six weekly Boeing 777-200 flights on the route. "British Airways is delivering on its promise to increase long haul flying to Asia following IAG’s purchase of bmi," the carrier said in a statement.

Following the bmi acquisition IAG CEO Willie Walsh spoke of a number of routes BA would look to launch with the London Heathrow slots bmi would bring to IAG. Mr Walsh named South Korea, as well as Indonesia and Malaysia, as specific examples. 

Asiana to focus over medium term on expansion of long-haul network and fleet

Asiana Airlines has unveiled a new medium-term business plan which envisions capacity and fleet growth of 25% over the next four years as the South Korean carrier aims to break into the top 10 global airline rankings. Asiana plans to focus over the medium term on expanding its relatively small long-haul network as opportunities for short-haul expansion become more limited due to bilateral constraints and increasing competition from LCCs.

Asiana’s medium-term fleet plan includes 17 additional aircraft, taking the fleet from 71 aircraft currently to 83 aircraft by the end of 2013 and 88 by the end of 2015. Narrowbody passenger, widebody passenger and freighter aircraft will all be added over the next four years. But the biggest capacity growth will be seen in the widebody passenger segment, which will grow from 32 to 40 aircraft.

The additional widebodies, including six A380s, are designed to give Asiana an opportunity to build up its long-haul network and close the gap with its Asian peers, which have much bigger operations in North America and Europe.

Asian aviation outlook relatively positive despite continued weakness in Japanese inbound market

Asian carriers continue to be impacted by weakness in the inbound Japanese leisure market as the recovery from the Mar-2011 earthquake and tsunami has been much slower than initially projected. But overall the outlook for Asian carriers is relatively positive as growth in Asia is expected to continue outpacing growth in mature markets, particularly Europe, by a wide margin.

In his welcome address at last week’s Association of Asia Pacific Airlines (AAPA) assembly of presidents in Seoul, Asiana CEO Young-Doo Yoon said “the Asia Pacific outlook is bright as relatively strong economic growth will continue to allow our region to outperform others”. AAPA director general Andrew Herdman said that “overall we’re still bullish on the future”.

Through the first nine months of 2011, AAPA members collectively recorded 4% year-over-year traffic growth in terms of both RPKs and total passengers carried. When excluding the impact of the Mar-2011 earthquake and tsunami in Japan, the growth would have been in the high single digits.

Weak Korean won, increased fuel costs and soft cargo demand erodes Korean Air's bottom line in 3Q

South Korea’s largest airline Korean Air Lines swung to a third quarter (three months to Sep-2011) net loss as increased fuel costs, a weak Korean won and soft cargo demand eroded the carrier’s bottom-line. The result highlights how closely tied the carrier is to currency fluctuations and cargo demand from Europe and the US, which is expected to remain sluggish throughout 4Q2011 and into 2012 as a consequence of Europe's debt crisis and weak demand in developed economies.

Korean Air senior VP Cho Won Tae earlier this month noted that while revenue in 2011 is relatively on-par to 2010 levels, costs have surged due to increased fuel costs. Korean Air, and its peer in the South Korean market, Asiana Airlines, are highly exposed to weakness in the freight market and have echoed comments made by North Asian peers such as China Southern, Cathay Pacific and China Airlines in noting that cargo has been weak in 2011, with freight demand failing to meet expectations. Korean Air has stated it expects the situation in 2012 "to be worse".

AirAsia Philippines impact on Cebu Pacific & PAL should be minimal – at least initially

Cebu Pacific, which has remained in the black in 1H2011 despite soaring fuel costs, does not expect the Oct-2011 launch of AirAsia Group’s new Philippine affiliate to curtail its growth or impact its profitability. Philippine Airlines (PAL), which was back in the red for the three months ending 30-Jun-2011, should also not be significantly impacted by AirAsia’s entry into the dynamic Philippine aviation market although the flag carrier continues to struggle against some of its existing low-cost competitors including Cebu Pacific.

Asiana Airlines operating profit falls sharply in 2Q2011, outlook uncertain

Asiana Airlines, South Korea’s second largest airline by revenue after Korean Air, reported a sharp reduction in operating profit in the three months ended Jun-2011 (2Q2011) as a result of the combined impact of the 11-Mar-2011 Japan earthquake and tsunami and high oil prices. The carrier however returned to the black at the net level in the quarter.