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Asiana Airlines' new Seoul-based LCC subsidiary will be closely coordinated with its parent

Analysis

Asiana Airlines continues to work towards launching an unnamed low-cost carrier to be based in Seoul, enabling Asiana finally to participate in the budget growth enjoyed by Korean Air-affiliated Jin Air and independent Jeju Air. The LCC would be Asiana's second after Air Busan, based in Korea's second-largest city. Air Busan is showing restrictions with a high cost base while Asiana, with a minority 46% stake in Air Busan, has limited say. Asiana intends to have majority ownership of the Seoul LCC.

Flagged for the LCC are thinner markets to Japan where Asiana is weak. Asiana's Japanese yields have fallen and has previously announced an all-economy configuration for short-haul services; but this appears also to have had limits and Asiana needs a step-change solution. Asiana has long worried it was over-exposed in the short-haul market, which it foresaw becoming more competitive. Long-haul growth with A380s and A350s was one measure to rebalance, and the Seoul LCC should further help. But Asiana must ensure the LCC can pursue valuable opportunities and not just be allowed to serve weak routes.

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