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03062019

Budget airlines the flavor of South Korean aviation market, Jeju travel booms

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The route between Jeju and Seoul has actually become the busiest in the world, as travelers like Bo-Ming flock to the southern resort island, luring them with cheaper fares from low-cost carriers. The 28-year-old barista would pay 22% more if she flew Korean Air Lines Co Ltd.

"On my previous trips to Jeju, I took both full-service airlines and low-cost carriers, but I don't think there is a big difference when it comes to services,” she told Reuters after her flight in less than one hour. in jeju.

Korean low-cost carriers (LCC) occupied most of the domestic market since Jeju Air Co Ltd launched five Q400 turboprop aircraft in 2005, which gave an impetus to major players such as Korean Air and Asiana Airlines Inc. brands.

Jeju Air is the No. 3 South Korean airline by revenue, serving 6 local and 66 international flights with 42 Boeing 737-700 aircraft. In November, she placed an order for $ 4.4 billion for 50,737 MAX aircraft.

According to the Jeju Tourism Association, the growth of low-cost airlines caused a sharp increase in the number of trips to Jeju: the number of tourists increased almost three times to 14.3 million. Compared to 5.3 million. In 2005-2018. tmsnrt.rs/2WEa5b8

According to OAG, in 2018, five South Korean carriers accounted for 61% of the travel market in Jeju.

"Not so long ago, many South Koreans felt that air travel was a luxury, but perceptions changed as budget carriers brought us lower fares, which made travel more affordable,” said a representative of the Korean International Airport in Jeju. for company policy.
SOUTH KOREA LEADS
In the wider North Asia, LCCs took off more slowly than in other parts of the world, in part because of China’s slow policy, Japan’s domestic duopoly and Cathay Pacific’s dominance in the Hong Kong market.

But South Korea, which hosts the prestigious annual meeting of the International Air Transport Association in Seoul this weekend, is special, and local startups such as Jeju, with the financial support of the government of Jeju Island, are encouraged to grow.

In March, the country's Ministry of Transport issued licenses for the aviation business to three additional budget carriers, which further led to industry overflow and increased competition.
53% of the domestic market of air carriers, such as Jeju and Jin Air Co Ltd, are ahead of 9% of LCC penetration in Japan and 13% in China, according to the CAPA Aviation Center.

Internationally, South Korean LCCs expanded rapidly to routes to nearby destinations, such as Japan, Vietnam and China, with specialized aircraft, and their market share increased to almost 57 percent on international routes to Japan in 2017, from 44 percent in 2016 year, according to the Ministry of Transport.

"We should not underestimate how important the role of low-cost carriers are on this route,” said Pak Son Bong, a senior analyst at Houl Financial Investment in Seoul.
SEVERAL HEAT FEATURES
Due to the fact that over the past five years, the volume of aircraft of budget carriers of the country has tripled, the outdated airlines Korean Air and Asiana feel the heat.

Korean Air's operating income fell by more than 40 percent to 640 billion won ($ 537 million) in 2018 from 1.1 trillion won in 2016, while Jeju Air's operating income almost doubled to 100 billion won during this period.

The budget division of Korean Air, Jin Air, was subjected to strong pressure due to public outrage at the behavior of its founding family members, while the largest shareholder, Asiana, financially put its stake on sale.
Their efforts meant benefits for independent low-cost carriers such as Jeju Air and Eastar Jet, as they expand their long-haul routes, such as Busan-Singapore, to attract more customers.

"For long-haul routes, customers tend to look for more premium services that previously could be found with full-service carriers. We now provide business-class services at more competitive prices, ”said Lee De-Woo, deputy general director of Jeju Air.



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