Asia’s lowest-cost airline, Air Asia, is planning to launch its own subsidiary in Korea.
According to the Ministry of Land, Infrastructure and Transport (MLIT) and aviation industry officials on November 15, Air Asia has begun the process of establishing a subsidiary company in Korea, to be named “Air Asia Korea,” with aid from both financial investors and strategic investors. And it is also preparing to submit applications for air transport business in Korea to MLIT. Initially Air Asia will operate a domestic route between Cheongju and Jeju, and has plans to apply for an international route in the future. In November, Air Asia’s CEO Tony Fernandes came to visit MLIT to present Air Asia’s roadmap, outlining its plan of operation.
Curious onlookers are watching closely at how Air Asia will operate its subsidiary. At the moment, there are two obstacles to Air Asia. First, there is a “rule that forbids a foreigner and/or foreign company from owning more than 50 percent share of an airline,” and there is a second “rule that prevents a foreign company from owning an airline.” Last year, Air Asia was unsuccessful in its attempt take over T’way Air, Korea’s low-cost airline, because of these rules and domestic airlines’ objections.
Currently, the MLIT is mulling over whether or not it should accept Air Asia’s application. It matters this time once again whether or not Air Asia’s entry into the Korean market will disrupt the aviation business and bring about inroads into the local market against the law of aviation that MLIT created to protect the Korean air transport and logistics industry.
This move is threatening Korea’s air transport industry, in particular the fledgling low-cost airlines that have just begun their baby steps.
An official for a local low-cost airline said, “Unreasonable pricing will have detrimental effects on the market,” adding, “Heated competition will eventually jack up prices, hurting consumers.”