Asiana Airlines (OZ, Seoul Incheon) has encountered tough opposition to its plans to establish a second Low Cost Carrier after Air Busan (BX, Busan) shareholders expressed fears that the proposed new Seoul Incheon-based carrier would cannibalize Air Busan's existing market share.
"The flight routes of a new airline may overlap with those of Air Busan. In addition, the support Air Busan gets from Asiana, the largest shareholder, may be diminished," a Kumho Asiana Group official told the Korea IT Times in June. "We will make an offer that Air Busan shareholders are willing to take so that they can participate as the new low-cost airline's shareholders."
Despite additional dialogue, neither Asiana nor Air Busan has been able to break the deadlock in the talks which have also reached an impasse concerning the carrier's proposed initial shareholding.
With the start-up set to require KRW15billion (USD145.8million) in initial capital, Air Busan shareholders have rejected an Asiana proposal that they take on the majority 56% stake, and with it the heavy initial losses, while Air Busan adopts the lesser 44% stake. Air Busan shareholders assert that they, along with other interested parties, assume the larger stake.
Air Busan's opposition to the new carrier is understandable given that it has set a March 2015 date for its IPO, funds from which it hopes to use for fleet and network expansion.