Kevin O'Toole/LONDON

Asiana Airlines is stepping up the search for a partner following South Korea's decision to lift the cap on airline foreign ownership to 49%. The carrier also raises the possibility of acting as a British Airways franchise partner in the Asia Pacific region.

The South Korea Government raised the ownership limit from 20% on 12 February, as part of measures to deal with the country's mounting economic crisis. "The door is now open for foreign investment," says Chan Yong Park, the senior management advisor at Asiana Airlines. He says that privately owned Asiana has "always welcomed foreign investors", but concedes that the current turmoil makes such a deal more likely.

The airline is struggling with a heavy fall in traffic to South Korea and a currency crash which has wiped out 50% of the value of the won against the US dollar. Asiana is still 62%owned by the Kuhmo Group, the chemicals-to-construction conglomerate which established the airline ten years ago. Another 19% is in the hands of Swiss Bank, seen as a potential further investor, and the remainder is with South Korean banks.

Asiana confirms that BA is seen as the "most desirable" airline partner, although financial analysts question whether BA would take on any direct financial exposure.

The South Korean carrier already has a codeshare agreement with BA alliance partners American Airlines, Qantas Airways and Canadian Airlines. Park says that the aim would be to provide BA with a link to Asiana's extensive regional services from Seoul, including destinations in Japan and mainland China.

BA has not confirmed the speculation, but sources in South Korea say that plans have been discussed for such a franchise arrangement.

Such a deal could help shore up BA's traffic on the London-Seoul route, where it flies three times a week with a Boeing 747-400. The UK carrier's load factor is understood to have dropped to below 28%in January, and it is considering following Swissair in dropping the route. Lufthansa and KLM have fared better, with load factors of 40-50%, but are also said to be considering reducing frequencies.

Asiana, which has won only limited route rights to Europe in its battle against incumbent Korean Air, has now had to suspend plans to start services to London this year. Park believes that the lack of a London service could prove a bar to discussions with BA, but hopes that negotiations "-will take place in the near future".

The airline has also pruned non-profitable routes within Asia in the face of mounting losses and dwindling traffic. Two leased Boeing 767s have been returned, with another two due to be sent back to the lessor shortly. Park admits that losses will continue this year, but says that the hope is for an early upturn in the South Korean economy during the second half of 1999.

He stresses that, while there have been "financial difficulties", the airline has postponed ,rather than cancelled, its Airbus A330 order.

Source: Flight International