Cheap airlines have the taste of the South Korean aviation market and the boom in travel to Jeju



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JEJU, South Korea (Reuters) – Kim Bo-Min, a Starbucks barista, paid 140,000 won (US $ 118) for a round trip from his hometown of Daegu to the famous island of Jeju, just before the start. to arrive on T & # 39; Way Air Co Ltd, from the fast-growing low-cost airlines sector in South Korea.

Tourists arrive at Jeju International Airport in Jeju, on Jeju Island, South Korea, on May 30, 2019. REUTERS / Yang Hee-kyong

The road between Jeju and Seoul has actually become the busiest in the world, as travelers like Bo-Min flock to the southern resort island, attracted by the cheaper rates of low-budget carriers. The 28-year-old barista reportedly paid 22% more if she flew Korean Air Lines Co Ltd.

"I took full-service airlines and budget carriers for my previous trips to Jeju, but I do not think there's a big difference in services," he said. – she told Reuters after her flight of less than an hour to Jeju.

Korean low-cost carriers (LCCs) have captured much of the domestic market since Jeju Air Co Ltd launched five Q400 turboprop aircraft in 2005, putting larger players such as Korean Air and Asiana Airlines in trouble. Inc. own budget brands.

Jeju Air is the 3rd largest South Korean airline in terms of revenue, operating 6 local lines and 66 international routes with 42 Boeing 737-700s. In November, he placed an order of $ 4.4 billion for 50,737 MAX.

The boom in low-cost airlines has led to an increase in the number of tourists to Jeju, with the number of tourists having almost tripled from 5.3 million to 14.3 million between 2005 and 2018, according to data from the US. Jeju Tourism Association. tmsnrt.rs/2WEa5b8

The five no-frills airlines in South Korea occupied 61 percent of the Jeju travel market in 2018, according to the OAG data company.

"Not so long ago, many South Koreans viewed air travel as a luxury, but the perception has changed as discount carriers have allowed us to lower fares, allowing more affordable trips, "said an official at Jeju International Airport of the Korean company Airports Corporation. company policy.

S.KOREA LEADS

In North America, low-cost countries have been slower to take off than in other parts of the world, partly due to slow Chinese policies, Japan's aviation duopoly and market dominance. of Cathay Pacific on the Hong Kong market.

But South Korea, host of the annual high-level meeting of the International Air Transport Association in Seoul this weekend, is out of the ordinary, local start-ups like Jeju, funded by the island's government. Jeju, being encouraged to grow.

In March, the country's Ministry of Transportation issued aeronautical operating licenses to three other budget carriers, increasing competition in the sector and intensifying competition.

The 53% domestic market share of carriers such as Jeju and Jin Air Co Ltd exceed 9% LCC penetration in Japan and 13% in China, according to data from CAPA Center for Aviation.

Internationally, South Korean low-cost countries have rapidly expanded their connections to nearby destinations such as Japan, Vietnam and China with narrow-body jet aircraft, with a market share of nearly 57 percent. on international routes to Japan in 2017, compared to 44% in 2016, according to South Korea. Ministry of transportation.

"We must not underestimate the importance of the role of budget carriers on a given route," said Park Seong-bong, senior badyst at Hana Financial Investment, based in Seoul.

INCUMBENTS FEEL HEAT

While the size of the country's budget carrier fleet has tripled in the past five years, the traditional carriers, Korean Air and Asiana, are feeling the heat.

Korean Air's operating income fell by more than 40% to 640 billion won ($ 537 million) in 2018, compared to 1,000 billion won in 2016, while Jeju Air's operating profit was almost doubled to 100 billion won over the period.

Korean Air's budget arm, Jin Air, has come under a lot of pressure following the outcry over the behavior of its founding family members, while Asiana's largest shareholder, in financial difficulty, put his stake in sale.

Photo of Jeju International Airport in Jeju on Jeju Island, South Korea, May 30, 2019. REUTERS / Yang Hee-kyong

Their suffering allowed independent carriers such as Jeju Air and Eastar Jet to save time, as they expanded their long-haul routes such as Busan-Singapore to attract more customers.

"For long-haul flights, customers tend to look for more premium services than previously found in full-service carriers. We now offer business-clbad services at more competitive prices, "said Lee Dae-woo, deputy general manager of Jeju Air.

(GRAPHIC: The busiest flight routes in the world, tmsnrt.rs/2WEa5b8)

Reportage by Heekyong Yang; additional report by Jamie Freed in Seoul; Edited by Himani Sarkar

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