Korea Aims To Halt LCC Propagation

 - July 24, 2018, 9:33 AM

A proliferation of low cost carriers (LCC) in South Korea has prompted the country’s Ministry of Land, Infrastructure, and Transport (MLIT) to halt issuing certificates to any more budget airlines. According to an MLIT official in Seoul, Kim Moon Soo, neither domestic nor regional markets can support more LCCs, especially the former.

“Allowing another LCC into the market could mean financial problems for the airline due to the stiff competition currently seen and with the spike of oil prices,” Kim said.

Kim noted that the MLIT hadn’t received an application from an LCC for an operating certificate as of late. The seven LCCs in Korea consist of Jin Air, Air Pohang, Air Busan, Jeju Air, Eastar Jet, T’way Air, and Air Seoul. With the exception of Air Seoul, the other six carriers control a combined domestic market share of 63 percent, once monopolized by Korean Air (KAL). Asiana Airlines and KAL now share the remaining 37 percent.

Dong-Hwa Electronics Company owns the latest LCC to enter the market, Air Pohang. The company invested $8.81 million for start-up operations in February with three Bombardier CRJ200 regional jets.

Based at Pohang Airport, it flies to Seoul (Gimpo Airport) and Jeju and harbors big plans for expansion over the next three years.

Regulations require Korean LCCs to operate domestic flights for two years before the airlines can apply for approval to introduce international services. Air Seoul, which started operations in July 2016, received an exemption from the two-year requirement.

Air Seoul’s owner, Korea breakbulk and heavy-lift operator AAL, also holds 46 percent stake in Air Busan. Jin Air, Air Busan, Jeju Air, Eastar Jet, and T’way Air have all expanded abroad, competing fiercely in the North Asia and Southeast Asia markets.

Jin Air, the fastest growing, stands as the only carrier to have established a long-haul destination in its network, flying daily service to Honolulu with Boeing 777-200ERs.

Kim said MLIT remains firm that Korean companies may not establish a joint venture LCC with a foreign airline.

Known as quite conservative and protective, Korean carriers and the local regulatory body fear that any encroachment by a foreign airline would further crowd the already highly competitive market.