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S. Korean Travel Sector Reels in Biz Setback
Tens of thousands of South Koreans are participating in candle-light protests in downtown Seoul on June 10, 2008 in the largest anti-US beef imports and anti-Lee Myung-Bak demonstrations.

S.Korean travel sector is battling to survive in the face of business slowdown against the backdrop of leadership crisis caused by controversies over U.S. beef import.

In recent past weeks, the candlelight vigil against import of American beef initiated by civic groups has turned into violent anti-government street rallies.

Statistics on outbound tourist traffic for May were not yet available, but travel agents said a substantial decrease was expected.

Uncertain sociopolitical situation is feared to scare off outgoing tourists adding to woes of the tourism sector which is already suffering from weakening value of Korean won against the greenback in the recent past four months or so.

Any upswing would depend on how quickly the ongoing government effort to bring the volatile situation under control bears fruit and reinstates some sort of public confidence in the leadership of President Lee Myung-bak.

The future is less certain for air carriers too. In the face of financial pinch caused by rising fuel prices, Asiana Airline has introduced this month a temporary retirement scheme for its staff members..

Under the system, Asiana staff members are requested to be suspended from office without being paid for a certain period of time on voluntary basis.

It was not known immediately, however, how many staff have so far applied for temporary suspension from office. It was the second time for Asiana to introduce the system since 2003 when the country's No. 2 air carrier was in management crisis in the wake of outbreak of SARS in Asian countries.

In the meantime, more travel agents were reported to have been considering restructuring nowadays in a bid to overcome difficult time ahead.

Sejung Tourmall, for instance, took steps late last month to downsize its structure. To this end, senior managerial staff of the company were asked to tender resignations en masse to give freer hands for top management, according to industry sources.

More recently, the government has announced that fuel surcharge system be reframed to 20 steps from the present 16.

With the implementation of new fuel surcharge formula, air fares are expected to increase by an average of 10 percent from the present levels.

Korean Air plans to impose 15,000 won in fuel surcharge on all domestic air tickets on one way basis effective July 1. The airline sector is flying into huge losses on the back of a surge in global fuel prices that have forced it to hike fares, slowing explosive passenger growth.

Its woes pushed the airlines to a snowballing loss and the red figure could double this year if oil prices remain at current levels.

Korean Air was reported to have sustained more than 30 billion won in accumulated deficits on domestic air routes as of May this year.

The forecast represents nearly a third of total global losses of 6.1 billion dollars projected by the International Air Transport Association last week if oil stays around 135 dollars until year end.

With the global oil price surging, airlines have hiked their fuel ticket surcharge five times during the past five months. Even with the fare increases, jet fuel now accounts for nearly 50 percent of operating costs, industry officials say.






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