Airline Industry Stretches Its Legs, Hopes During Peak Season

The domestic airline industry, having previously been faced with a reduction in the number of passengers due to SARS, has slowly begun to see signs of recovery during the current peak season. Routes to China have been reopened, after the brief respite due to SARS.

‘Triple Distress’ in the Airline Industry

With the occurrence of SARS in China on top of high oil prices due to the Iraq War this year, domestic airline companies had to enforce route structure adjustments by cutting operations to China, their most profitable among international routes.

Even worse, boarding rates decreased by 20% compared with other years when generalized economic stagnation hit hard this year. For Asiana Airlines, boarding rates which were recorded at 72% and 76% in January and February respectively rapidly dropped to 62% in March, 53% in April and 56% in May.

Korean Airlines and Asiana Airlines, both of whom recorded profits up until last year showed deficits of 180 billion won and 59.5 billion won respectively during the first quarter (January ~ March) of this year. They are expecting enormous deficits during the second quarter (April ~ June) as well.

SARS recovery

As SARS has slowly started to wane in China along with the upcoming peak travel season (July and August) of the year in the airline industry, airline companies are planning to make up for the loss by reopening and increasing traffic.

Korean Airlines has decided to reopen eight of 10 routes to China in the middle of July, which were stopped because of SARS along with increasing four routes including their Incheon-Bangkok route. They are also planning to add large-scale special aircraft to five routes such as the Incheon-Guam route during the vacation season.

Asiana Airlines will also reopen four of eight lines to China in the middle of July. Four China routes such as Incheon-Beijing will return to normal operations before the occurrence of SARS.

Can airline companies completely recover?

The international boarding rates for two airline companies have somewhat stabilized. However, boarding rates were measured in the midst of greatly reduced or eliminated ‘seat availability,’ thus it is uncertain whether they have completely “normalized”.

Accordingly, airline companies are carefully waiting for boarding rates in July once they increase seat availability by reopening or increasing routes as in normal years` past.

Jong sik Kong kong@donga.com