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(LEAD) S. Korean airlines reduce flights to Japan amid trade row

All News 16:14 July 30, 2019

(ATTN: ADDS stock prices and analyst comments in paras 9-13)
By Choi Kyong-ae

SEOUL, July 30 (Yonhap) -- South Korean airlines have suspended services or plan to reduce the number of flights on some Japanese routes as outbound travel demand falls amid escalating trade tensions with the neighboring country.

On Tuesday, Asiana Airlines Inc. said it will reduce the number of flights on the routes to Japanese destinations, such as Fukuoka, Osaka and Okinawa, starting from mid-September.

Asiana is the latest among local airlines that have decided to readjust flight schedules to Japan as an increasing number of South Koreans are expected to choose other countries for vacations.

A day earlier, top carrier Korean Air Lines Co. said it will suspend its Busan-Sapporo route from September for the same reason. Korean Air plans to cease its three regular weekly flights between the Korean southern port city and the northeastern Japanese city beginning Sept. 3.

The country's biggest full-service carrier said it will provide domestic flight services to bring those who have booked the Busan-Sapporo route to Incheon International Airport and then have them use the Incheon-Sapporo route.

Korean Air had been considering dropping the route due to tougher competition with low-cost carriers, but a recent sharp decline in travel demand from Busan to Sapporo precipitated the decision, the company said.

Low-cost carriers, such as Air Busan Co., Eastar Jet and T'way Air, were quick to respond to sagging travel demand to Japan. They have already announced plans to reduce flights on routes from South Korean cities, like Daegu and Busan, to less popular Japanese cities, such as Narita, Oita and Kumamoto.

Jeju Air Co., the country's biggest budget carrier, joined its smaller rivals. It plans to reduce flights on "less-profitable" routes to Japan though the particular routes have yet to be decided, a company spokesman said.

On Tuesday, airline stocks were mixed across the board.

Korean Air ended flat at 26,050 won, Asiana closed down 0.7 percent to 5,960 won and Asiana's budget carrier unit, Air Busan, fell 1.5 percent to 6,660 won.

But Jeju Air, the country's biggest low-cost carrier, jumped 7 percent to 27,550 won, Korean Air's budget carrier unit Jin Air Co. rose 2.6 percent to 15,800 won and T'way rebounded 2.1 percent to 5,350 won after recent declines. The broader KOSPI gained 0.5 percent.

"Korean Air and Asiana ended flat and lower, respectively, due mainly to declining cargo-shipping volumes. Low-cost carriers, such as Air Busan, fell due to their high exposure to Japanese routes though they do not carry cargo," Mirae Asset Daewoo analyst Ryu Je-hyun said by phone.

But Jeju Air and Jin Air have relatively balanced portfolios in terms of routes. In particular, Jeju Air is better positioned to respond to lower demand on Japanese routes as it operates 45 passenger jets, the most among South Korean low-cost carriers, that can be deployed on alternative routes, analysts said.

Early this month, Japan tightened controls on exports of key high-tech materials to South Korea, in apparent retaliation against a series of South Korean court rulings last year over Japan's wartime forced labor.

Japan is widely expected to pass a bill later this week to remove South Korea from its "whitelist" of trusted trade partners, in what would be an additional economic retaliatory measure against Seoul.

Korean Air's B787-9 jet (Yonhap)

Korean Air's B787-9 jet (Yonhap)


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