South Korea

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.

LCC penetration in domestic South Korean market reaches new highs but at what cost?

South Korea’s five major LCCs held an aggregate domestic market share of 42.3% in 3Q2011 in the third quarter of 2011, up from the 40.3% in the six months to Jun-2011 (1H2011), which itself was a new record for LCC penetration in the North Asian nation. This penetration, as confirmed by South Korea’s Ministry of Land, Transport and Maritime Affairs, marks a significant rise from a combined market share of just 9.7% three years ago.

However, profitable growth remains a continued challenge for South Korea’s LCCs. In 2008, two LCCs in the market, namely Hansung Airline and Yeongnam Air, collapsed amid challenges economic conditions, high fuel costs, a weakened Korean won and funding challenges amid the global economic financial crisis. Among those left standing, losses were heavy, with the nation’s four LCCs in 2009 – EastarJet, Jeju Air, Jin Air and Air Busan, reporting combined losses in excess of USD55 million in 2009.

Jetstar-JAL LCC, "Jetstar Japan" to commence service by Dec-2012

Japan Airlines Corp, Jetstar Airways and Mitsubishi Corp confirmed plans to establish a LCC JV in the Japan market by Dec-2012. Jetstar Japan will be Japan's third new LCC announced this year, following hard off the heels of All Nippon Airways' announcement last month that it plans to establish a JV with leading low cost airline AirAsia, AirAsia Japan, in addition to its previously announced LCC, Peach. The JAL JV would add another piece to the complex jigsaw that is now transforming the Asian airline market. The potential market growth as these successive ventures are introduced can be measured in the hundreds of millions of new passengers. Removal of highly restrictive regulatory conditions and the scale of opportunities as new city pair market options emerge mean literally that the sky is the limit for growth upsides.

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.

Korean Air swings to net profit but in the red at operating level

Korean Air swung to a net profit of in the three months ended 30-Jun-2011 (2Q2011) aided by foreign currency gains but slipped to an operating loss due to high fuel costs and reduced travel demand to Japan following the 11-Mar-2011 earthquake and tsunami.