Korean Air urges government to ease restrictions on inbound arrivals

Korean Air’s chief executive has urged South Korean authorities to lift pandemic restrictions on air passengers, warning the country was opening “too slowly” to beat regional rivals in the race to capture pent-up demand.

Walter Cho, chief executive and scion of the controlling family of the airline’s parent Hanjin Group, said bookings were full for the next three months but restrictions on passenger volumes had stopped the company from adding more flights.

“They should be opening up and we should be at, at least 80 or 90 per cent capacity. But right now, we’re basically at 25 per cent and can’t sell any more tickets, “he told the Financial Times in an interview.

South Korean authorities lifted social-distancing measures and downgraded Covid-19 to a “Class 2” disease on Monday, ending restrictions that were first imposed in March 2020. But limits on air passenger volumes remain.

Domestic flights accounted for just 6.6 per cent of Korean Air’s total revenues in 2019, highlighting the financial importance of overseas arrivals to the airline.

“People want to get out to vacation spots in Asia – to Singapore, to Thailand, to Vietnam,” said Cho, describing as “nonsense” the PCR test requirement for all inbound passengers to South Korea.

Chief executive Walter Cho said restrictions on passenger volumes had stopped Korean Air from adding more flights © Jean Chung / Bloomberg

Cho also rejected concerns about the flagship carrier’s proposed merger with local rival Asiana Airlines, arguing that it would boost competitiveness in a crowded Asian market.

The proposed $ 1.6bn purchase of a 63.9 per cent stake in Asiana has received qualified approval from the Korea Fair Trade Commission but awaits decisions from regulators in several other jurisdictions including the US, EU and China.

The merger would create the world’s 10th largest airline in terms of combined international passenger and cargo volume, with the fourth-largest share of air cargo.

But critics said a combined entity could have more than a 50 per cent share in 32 of 323 international routes in and out of South Korea, and a 100 per cent share in seven direct routes, including flights from Seoul to Los Angeles and New York.

The KFTC’s approval was granted on the condition that the new airline would give up traffic rights or landing slots on certain routes. It also placed limits on fare increases and capacity cuts on routes lacking competition.

Cho said Korean Air and Asiana were being squeezed by an over-proliferation of low-cost carriers in Korea and intensifying competition from regional rivals on Asian and transpacific routes, making consolidation inevitable.

“We were not able to expand as much, but the global competition was always getting stronger. The merger was an opportunity, but it was also a step for survival in the long term. Korea cannot afford to have nine airlines, ”he said.

He admitted that engaging with US regulators had been tough, although he hoped they would show goodwill after Korean Air transported “billions of masks and test kits” in empty passenger planes to America during the pandemic.

Cho said US consumers would benefit from more competition to regional rivals, especially once it incorporated Asiana’s routes to China and south-east Asia.

He added that Korean Air had also profited from Hong Kong’s travails, where passenger numbers have slumped because of tough Covid quarantine rules.

“We picked up a lot of freight business from them, and I do not know if they could ever recover from this, because a lot of people are actually avoiding Hong Kong now,” he said.

Cho added that Seoul’s Incheon airport, which has overtaken Hong Kong in terms of traffic, was well-placed to consolidate its position as a regional hub because of Korea’s proximity to China and its ability to avoid the country’s “overcrowded” air space.

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