South Korea Issues Licenses for Three New LCCs

 - March 6, 2019, 3:52 PM

South Korea’s Ministry of Land, Infrastructure, and Transport (MLIT) has issued licenses to three new low-cost carriers (LCCs), further crowding an already broad field of discount airlines in the country. The three airlines—Aero K, Fly Gangwon, and Air Premia—plan to join six established LCCs in the fiercely competitive market.  

Answering skepticism about the decision to grant new licenses in such a congested market, MLIT official Kim Jung Rak said the ministry’s studies into the competitive environment showed prospects for further growth. Kim said any company applying for a license must control a minimum starting capital base of $13.5 million, exhibit an ability to hire pilots and flight attendants, and produce a proper operating manual.

Still, the MLIT’s decision to issue the licenses comes as a surprise following its insistence last year that it planned not to issue another air operator certificate.

The six incumbent LCCs, namely Jeju Air, Air Busan, Jin Air, T’way Air, Air Seoul, and Eaststar Jet, compete for 55.8 percent of the country’s domestic and international air traffic. Korean Air and Asiana Airlines share the remaining 44.2 percent. Another LCC, Air Pohang, suspended Bombardier CRJ200 operations in December with plans to relaunch with Boeing 737-800s by the end of this month.

The three new airlines need to apply for their AOCs within a year and commence operations within two years or risk license revocation. With licenses already secured, however, obtaining the AOCs amounts to only a formality. Aero K plans to base its operations at Cheongju International Airport in Chungcheong province, Fly Gangwan at Yangyang International Airport in Gangwon province, and Air Premia at Incheon International Airport. None of the three have publicized details of planned aircraft types or route networks.

Korean LCCs must operate domestic flights for two years before the MLIT issues them approval to introduce international services. Wholly owned by Asiana, Air Seoul gained an exemption upon its launch in 2016. Asiana also holds a 46 percent stake in Air Busan.

The MLIT does not allow Korean companies to establish LCC joint ventures with foreign airlines. Known for their conservative nature and readiness to protect their home turf, Korean carriers worry that any encroachment by a foreign airline would crowd the market still further. The local regulatory body has proved equally protective.

An official at Jeju Air who asked for anonymity said the entry of the three LCCs would fragment the domestic and regional markets further. “It will not be a surprise should one airline go out of business in the near future,” he said.