Korean Air Co. unveiled a plan to launch a low-cost airline unit next year with an aim of overtaking Tiger Airways and becoming the biggest budget carrier in Asia by 2012, a company executive said Monday.

Korean Air, South Korea's largest airline, said it will start the low-cost airline unit, tentatively named Air Korea, with routes to Asian destinations in May, joining the competition among regional budget carriers to lure international passengers.

"With sales of 250 billion won (US$269 million) in 2012, our target is to become Asia's top budget carrier by overtaking Tiger Airways," said Kim Jae-keon, executive vice president of Korean Air's Budget Airline Task Force Team, in an interview. Tiger Airways is partly owned by Singapore Airlines.

Korean Air plans to set ticket prices for the low-cost carrier at a level of between 75 percent and 80 percent of the parent company's ticket prices, Kim said.

Air Korea will offer routes to Shandong and Hainan provinces in China, destinations in Japan excluding Tokyo as well as Thailand and Malaysia, Korean Air said.

Air Korea aims to generate 100 billion won in sales for its first fiscal year and swing to a profit three years later, Kim said.

Kim said Korean Air is losing ticket sales to budget carriers.

"Currently, 18 budget carriers account for 13 percent of ticket sales at Incheon International Airport," Kim said, referring to the main gateway to South Korea. "In case of travel tickets, they control more than 30 percent." Last week, the board of Korean Air approved the plan to set up the budget airline unit with a paid-in capital of 20 billion won (US$21.5 million), the company said in a statement.

Korean Air officials expected the government to easily grant a license for the budget airline unit.

However, the Ministry of Construction and Transportation, which is in charge of supervising airlines, has said it would award an international route license for a budget airline unit of Korean Air if the low-cost carrier operates domestic routes first.

"The government's basic stance is that an airline should first operate domestic routes and then be allowed to operate international routes," said an official at the ministry.

In the first stage, Korean Air will operate the budget airline unit with three Airbus A300s and two Boeing 737s, the statement said.

Air Korea plans to gradually add short- or mid-haul destinations, it said.

Maintenance and operation training will be outsourced to Korean Air, according to the statement.

SEOUL, Nov. 26 (Yonhap)