Feature: Let the Korean Air War Begin

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While consumers stand to benefit immensely from increased foreign competition, Korean low cost carriers (LCCs) are voicing concerns over an impending loss of market share and what they say is an inability to compete with larger foreign budget carriers such as Malaysia-based AirAsia.

The South Korean commercial aviation authorities have traditionally been protective of local budget carriers, but have recently started opening up to foreign LCCs—all of whom offer steeply cut rates to build their customer base on the peninsula. Sometimes, ridiculously low.

The trend started when Philippine-based Cebu Pacific, one of the first foreign LCCs launched here, offered promotions featuring one-way tickets from Incheon and Busan to Cebu or Manila for 1 Philippine peso (27 won). Including taxes the total price came to around 30,000 won (US$27).

Other foreign carriers followed suit. Japanese low-cost airline, Peach Aviation, which started flights to Seoul last May, offered a similar promotion, selling one-way tickets from Incheon to Osaka for 30,000 won including tax. Tickets for the promotion sold out within 48 hours.

Prices aren’t always that low, but how’s that for seeking market share?

Analysts expect the competition for attracting more Korean flyers to grow even tougher in the final quarter of this year, as foreign LCCs look to expand routes to include domestic flights, and more Asia-based budget airlines are expected to make a move into Korea in the near future. This includes an increased presence by AsiaAir, Asia’s largest low-fare, no-frills airline and a pioneer of cut rate flying for consumers.

Good ol’ days are gone

In previous years, Korean-based LCCs, such as Air Busan and Jeju Air, have enjoyed little competition to sway Korean travelers out of their cabins. Officials from the local LCCs claim they have higher operating costs, which is why their tickets prices have generally remained higher than neighboring countries.

Tony Fernandes, CEO of AirAsia, told a reporters in Seoul earlier this year that regardless of the why local carriers kept prices higher, those days are over.

Korea has five LCCs, but the costs are not really low or reasonable. I think there is plenty of room in the market for AirAsia to grow.

This week, AirAsia Japan is set to launch operations on a second international flight to Korea with daily service from Tokyo to Busan, in addition to their newly launched direct flight to Incheon airport near Seoul. The new route will begin operations on November 28 with flights running daily.

To counter the fierce foreign competition, Korean LCCs have lowered prices and set out to increase international routes to China, Japan and the Philippines. But it’s not going to be easy keeping pace with foreign LCCs such as AirAsia, according to an anonymous Korean official who recently spoke with the China Post.

We cannot offer tickets as cheap as what is offered by AirAsia. It is almost impossible to cope with AirAsia cost-wise, when the company lowers its ticket costs by purchasing planes in large quantity.


For more information on airlines and Gimhae Airport, you can check out the Haps Transportation Page.

Jeff Liebsch contributed to this story.


 

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