Home' Asian Aviation : AAV October 2017 Contents 32 AsianAviation | October 2017
SOUTH KOREA, THE FIRST MAJOR LOW COST CARRIER LCC
MARKET in Northeast Asia at about 10 years old, has six budget air-
lines. The best known are market leader Jeju Airlines, with Air Busan
and Jin Air just behind it. The newest one, Air Seoul, started last year.
"They're not as well-known as other Asian discount carriers, but
the (Korean) low-cost carriers are making money at the expense
of Korean Air and Asiana, that much I'm convinced," said Shukor
Yusof, founder of Malaysia-based aviation consultancy Endau
Analytics. Korean Air and Asiana Airlines are the country's chief
Korean passengers are used to being treated lavishly in-flight,
challenging budget carriers at first to take passengers away from
full-service rivals, said Will Horton, senior analyst with the CAPA
Centre for Aviation market research organisation in Hong Kong.
Budget airlines are often "hybrid" in their costs and amenities,
Horton said. That term implies hallmarks of both budget and full-ser-
vice airlines. Korean-style budget airlines, for example, may not
charge for luggage, meals or seat assignments. But like budget peers
overseas, they pack a lot of seating onto planes.
Air Busan, for example, assigns seats and serves meals for free,
the 10-year-old company said. Distance between cabin seats aver-
ages 32.5 inches, the widest among domestic budget carriers. The
airline brings magicians, tarot card services and baristas on-board
as well to "add (to) the enjoyment of travel," it says.
"Air Busan's business model...is under the fusion or converging
type business model," the airline said. "The cost is not simply cheap."
The Asiana-owned carrier based in South Korea's chief port city
of Busan will add two aircraft this year and plans to increase the
number of routes. It fills an average 83 percent of seats.
Passengers under 35 who book tickets by phone are driving
much of the South Korean budget airline growth, Yusof said.
Younger passengers do the same elsewhere in the region --- espe-
cially in Southeast Asia, where budget carriers operate 74 percent
more aircraft than in the Northeast Asia including South Korea.
"Young Koreans are a savvy bunch and are starting to move more
domestically and internationally," he said.
Younger people from nearby Japan are helping the market by
flying cheaply to South Korea, where K-Pop music has spread to
elsewhere in Asia, Yusof added.
South Korea's budget carriers operated a total 103 aircraft last
year after adding 22, according to CAPA Centre for Aviation data.
Just eight low-cost airlines operate in the much larger China
market, by comparison. Analysts expect the Chinese airlines to
grow but remain under 20 percent of the total China market. Budget
carriers make up 30 percent of the Japan-South Korea market, the
CAPA Centre says.
Korean budget airlines filled 22 percent of the country's interna-
tional seats in November last year, data shows. This year, the six
carriers have scheduled a combined 183,471 flights, up from 88,884
in 2013, air travel intelligence firm OAG data show. Of the 2017 total,
Jeju Airlines led with 60,731 flights and Air Busan came in second
with 43,374. All airlines gained over the five years.
" There is a huge amount of growth in this market sector, which
both highlights the popularity of the business and points to perhaps
some overcapacity in the market that will in time result in consolida-
tion or perhaps a slowdown in market growth in the next few years,"
OAG senior analyst John Grant said.
Low-cost airlines in Korea could find it hard to expand further,
First, a loss of Chinese tourists this year may have "closed out some
market opportunities," Grant said. Those tourists have boycotted South
Korea since April to protest its deployment of a US-designed Terminal
High Altitude Area Defence (THAAD) system that may be able to peer
into China. Arrivals from China fell by two-thirds that month.
Carriers also struggle for limited airport slots and rights to fly
international routes around the congested region. South Korea's
flagship Incheon Airport aims to finish a third construction phase
this year to support 62 million passengers and 1,000 daily flights as
capacity maxes out. Busan is running out of aircraft slots, the CAPA
Centre says, and Hong Kong has a limited supply.
Patience pays off (sort of)
South Korea's budget airline sector is growing on demand from Internet-savvy younger
passengers, despite a historic preference for full-service carriers, but the carriers now face
space constraints that could curb expansion. Contributor Ralph Jennings reports.
Low-cost carrier Jeju Air is one South Korean LCC
making inroads into the markets of legacy carriers.
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