South Korea's number two airline believes new hub will help it in international ambitions

Asiana Airlines will decide by the middle of next year whether to join Star Alliance or Oneworld, following its rival Korean Air's entry into the Delta and Air France-led SkyTeam grouping.

Though Star and Oneworld have not officially stated an interest in gaining a foothold in Korea, Asiana believes they will be tempted by Seoul's new international hub at Incheon, a possible gateway to China and Japan.

Asiana, South Korea's number two airline, is meanwhile upbeat on prospects for a recovery next year despite forecasting a loss of $100-110 million for this year. "All the signals are that we are moving in a positive direction," says Asiana president and chief operating officer Park Chan-bup.

Industry sources say All Nippon Airways has been heavily courting Asiana on Star's behalf, but the South Korean carrier is approaching its alliance decision cautiously, as it already has bilateral relationships with several Oneworld carriers, including Cathay Pacific and Qantas. It hopes to resume code sharing with American Airlines, also a Oneworld member, now that the US Federal Aviation Administration is restoring South Korea to a Category 1 safety oversight rating. The country was downgraded to Category 2 in August. "Sooner or later we have to take our final decision," says Park.

Asiana has been hit by the decline in transpacific traffic, but passenger numbers on flights within Asia are holding up,meaning the impact on Asiana is "not as much as the US and European carriers are now experiencing", he says.

Passenger numbers and revenue passenger kilometres were down 8-9% in October compared with a year ago.

Park admits that the airline has lost money every month since September 2000 with the exception of July and August this year. The forecast loss of up to $110 million for the year is roughly equal to the loss recorded last year.

However, Park says, "I guess we can make a profit in December, which means we are now turning around." He says Asiana is on track to return to profitability next year, helped by lower fuel costs, a stable currency and South Korea's status as a co-host of the 2002 soccer World Cup. A stronger currency will reduce the cost of servicing foreign debt and dollar-denominated operating expenses.

Under efforts to refocus on its core aviation operations, Asiana will spin off its airport handling and in-flight catering business, and should select buyers by the end of this year and mid-2002 respectively.

Source: Flight International