Air Transport World

The treasure chest in the backyard: with China and Japan as neighbors, Asiana Airlines doesn't have to look for gold in long-haul markets. (Profile).

In a region of the world notable for the vast distances separating major centers of population and commerce, Asiana Airlines believes it has found gold closer to home. Let others assemble massive fleets of long-range aircraft necessary, to sustain global networks. The Seoul-based carrier will leverage its membership in the Star Alliance to maintain a presence in Europe and the Americas through codesharing and frequent-flier reciprocity while it devotes most of its resources to strengthening market-leading positions to China and Japan.

It's a program in tune with these uncertain times and the fact of geography that placed Seoul on an imaginary latitude almost equidistant from Beijing and Tokyo. Each is within approximately 2 hr. flying time of Asiana's hub at the spectacular new 24-hr. Incheon International Airport, which provides the perfect launching pad into China and all of north Asia.

But it represents a major break from the aggressively expansionist strategy undertaken by Asiana--and airlines of other so-called "tiger economics"--during the first decade of its existence, a period that ended with the Asian economic meltdown of 1997-98. "Until the IMF crisis, we focused only on growth," agrees Sam Koo Park, chairman and CEO of the carrier and its parent, the Kumbo Group.

Today, officials no longer speak of catching and even surpassing national rival Korean Air in terms of size and route network. They seemingly are at ease with their 24% share of international traffic and see it growing just two percentage points through 2007. Quality, not quantity, is the watchword in Asiana's 15th year of operation. Of course, with a route network covering 13 domestic and d 5 international destinations in 15 countries, served by a fleet of 63 aircraft operating (pre-SARS) some 1,000 weekly flights, Asiana maintains a noticeable presence on the world stage.

Nevertheless, profit margins and the balance sheet are getting a lot more attention these days, with no new aircraft orders on the horizon. Actually, the fleet will shrink by one this year and will increase by a net of only four through 2007 as a stream of 767 and 737 retirements--both types are being phased out--largely offset deliveries of 20 A321s, A330-300s, 777-200s and 747-400Fs. Over the same period, the airline expects to reduce its debt ratio From 342% to 119% and raise its credit rating from BB to A.

It is a conservative strategy and it paid off handsomely last year in a pre-tax profit of 150.1 billion won ($125 million) on sales of 2.57 trillion won, representing a 6% margin and the first pre-tax profit since 1999. …

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