Asiana: What Recession?

In a strong sign that Asia's carriers are rebounding from the region's economic crisis, South Korea's Asiana Airlines is profitable, is taking delivery of new airplanes again, and has resumed hiring pilots and cabin crew.

Hard-hit by South Korea's near economic collapse in 1998, which resulted in more than a 50% devaluation of the won, Asiana trimmed the ranks of its highly paid top executives by 20%, sold 10 transports, and postponed the delivery of several others. The airline also suspended service on unprofitable long-haul routes such as Seoul-Vienna and Seoul-Istanbul, according to Sang Hwan Park, senior vice president for Asiana. A hiring freeze and rotating one-month staff furlough was instituted, effectively cutting staff by 20% at the 11-year old carrier.

Although drastic, the cuts produced results. Domestic traffic, down 24% a year earlier, grew more than 8% in 1999. International passenger loads were up almost 19% and cargo expanded 17% for the year. Revenues followed in lockstep, growing 16.5% to $1.13 billion. Passenger growth of 5% to 10% annually is forecast over the next five years.

To support its turnaround, Asiana resumed aircraft deliveries last year, taking six new aircraft including two Boeing 747-400s. All 620 employees on furlough have been returned to work. Indeed, the Seoul-based carrier now is back in a hiring mode, Park said. It's to recruit 1,100 people this year, including 120 pilots and 290 cabin crew.

Along with its improving financials, Asiana's load factors have increased to over 77% for international flights and 70% on domestic routes. Market share also has risen sharply, to 38% of domestic enplanements and about 21% of all international passengers and freight. Aiding this growth has been the continuing poor safety record of competitor Korean Air. The South Korean economy also has been steadily improving, growing over 10% last year with only one percent inflation.
Currently Asiana operates 50 transports, about half of them widebodies. Another four aircraft are scheduled to be added both this year and in 2001. A little over half the fleet is leased. Asiana operates 17 domestic and 42 international routes.
A move to Seoul's new Inchon International Airport, which is scheduled to open next year, should further improve Asiana's long-term prospects. In addition to its increased capacity, the South Korean government is grooming the facility to become a major Northern Asia hub and alternative to crowded Tokyo-Narita.