Asiana Airlines pulls out of lucrative MRO business

Park Sae-jin Reporter() | Posted : August 29, 2016, 14:42 | Updated : August 29, 2016, 14:42

[Courtesy of Asiana Airlines]


Asiana Airlines has pulled out of a project to build a site for aircraft maintenance, repair, and operations, officials said Monday, as the country's second largest carrier company has been tied up with aggressive corporate restructuring to reduce cost and debt.

Maintenance, repair, and operations (MRO) have emerged as a new promising business as it can save repair expenses paid to external contractors. South Korea has promised to nurture home-grown MRO operators especially to reduce the heavy reliance of low-cost carriers on foreign service providers.

There has been a two-way race between the central city of Cheongju in North Chungcheong province and the southern port city of Sacheon to house an MRO site.

On Monday, North Chungcheong province governor Lee Si-jong said that it has received an official answer from Asiana about its withdrawal from the MRO project pushed by Cheongju which has already spent more than 32 billion won (28 million US dollars).

"We express our regret at Asiana Airlines which has pulled out of the Cheongju MRO project," he said.

Originally, Asiana signed a deal to cooperate with Cheongju in January last year while Sacheon has teamed up with a consortium led by South Korea's sole aircraft manufacturer, Korea Aerospace Industries Ltd. (KAI).

KAI has been in a more advantageous position than Asiana, which saw its worst-ever year in 2015, hit by a sharp fall in air travel and tough competition with budget carriers.

Asiana reported a net loss of 81.5 billion won last year, a turnaround from a profit of 63 billion won a year ago. Its balance sheet improved this year as a result of its aggressive push for an overhaul of unprofitable routes and sales of noncore assets.

Asiana's second-quarter operating profit came to 28.8 billion won, compared with a loss of 67.1 billion won a year earlier, thanks to a jump in the number of local residents going abroad and strong demand in China, Japan and Southeast Asian nations.

But analysts have painted a gloomy long-term outlook for Asiana.

Aju News Lim Chang-won = cwlim34@ajunews.com
 
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