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Asiana's plan to launch 2nd budget carrier runs into opposition from rivals

Asiana Airline Inc.'s plan to launch its second budget carrier has run into opposition from rivals, who warned against excessive competition, industry and government sources said Thursday.

According to industry insiders, several airlines filed formal objections on the creation of Air Seoul, citing safety concerns and the impact on the already oversaturated market. Asiana already jointly operates Air Busan with the city of Busan.

The Ministry of Land, Infrastructure and Transport formally announced Asiana's intent to launch the low-cost carrier on Oct. 22, and accepted statements from companies that can be affected. South Korea's No. 2 full service carrier submitted a request to the ministry so it can launch the airline on Oct. 19.

Besides its two premium carriers -- Korean Air Lines Co. and Asiana -- South Korea has five no-frills airlines. Of these, Jeju Air Co. owned by Aekyung Industrial Co. is the country's largest, with a fleet of 20 planes, followed by Jin Air Co., Ltd. and Air Busan, Eastar Jet Co. and T'way Airlines.

Exact details of the objections raised were not made public, although industry watchers said many are opposed because another entry will only fuel competition for pilots and maintenance personnel, as well as further crowd takeoff and landing slots at airports.

"The consensus is that the launch of yet another airline will not really benefit consumers and only weaken the competitiveness of South Korean LCC that are already hard pressed to cope with challenges from overseas rivals," said a source, who declined to be identified. He pointed out that local budget carriers have consistently been opposed to the creation of another airline at this juncture.

In addition, Busan has made clear that it opposes Asiana creating a new LCC, because it could lead to less investment being allocated to Air Busan. The country's largest port city and 14 other regional companies own a 54 percent stake in the airline, with 46 percent of the stake controlled by Asiana.

Related to the objections raised, the transport ministry said it will ask Asiana to counter the arguments raised before it convenes a transportation permit board to decide whether or not to issue an operating license.

"Overall market conditions, validity of the business plan and customer convenience will be checked," an official source said. He added particular attention will be paid to safety, before any decision is made.

Asiana said Air Seoul will use Incheon International Airport, west of Seoul, as its main hub. It said during the day it will operate flights to China and Japan, while at night it will fly to Southeast Asia.

At the start, Air Seoul plans to lease three A321-200s from Asiana and increase the number by two more aircraft in 2017. The company hopes to start offering commercial flights in the second quarter of 2017. (Yonhap)

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