Korean Air Will Respond Aggressively To LCC Competition

On Monday June 3rd, the Chairman and Chief Executive of Korean Air, Walter Cho, spoke at a press conference during the IATA Annual General Meeting. One of his main points: His airline has been passively observing the rise of low-cost carriers (LCCs). But now that’s going to change.

A Korean Air Boeing 787 takes off. Photo: Wikimedia Commons

According to FlightGlobal, Cho made the following comment during the press conference, which was held at the COEX Convention Centre in Seoul:

“In the past we have been very passive in confronting the low-cost carriers but now they are interfering with our side of the business and it has been overgrowing the size of the market. In the future we will be taking more aggressive actions towards this market,”

To maintain the airline’s ability to compete against regional and international competitors, Korea Times says Cho reportedly plans to seek more joint ventures with other carriers:

“The Delta joint venture has been growing at a steady rate and has produced satisfying results, and we plan to seek more with other airlines in the future.”

Jin Air

Although no details of action came from Cho, we can assume that Jin Air will have a key role to play. According to the CAPA website, Jin Air is South Korea’s second largest low-cost carrier and is “wholly owned by Korean Air”. It handled 8.9 million passengers in 2018. Reuters reports that It employs about 1,900 workers as well as over 10,000 subcontractors.

Jin Air has a surprising fleet as a LCC, operating four Boeing 777s. According to the Jin Air website, “Jin Air is the first domestic LCC in Korea to deploy and operate the B777-200ER, which was first supplied in 1995 and was verified for safety and is still being used by major airlines today.” In addition to the 777s are 22 Boeing 737 aircraft, with 12 of those planes at or approaching 20 years old.

Jin Air is wholly under ownership by Korean Air. Photo: Wikimedia Commons

Last August, the South Korean transport ministry banned the Jin Air from adding new aircraft and expanding routes. The ban will lift as soon as the airline significantly improves its governance practices.

The competition

In South Korea’s short-haul low-cost market there are three dominant forces:

  • Jeju Air: The country’s first and largest LCC. Handled 12 million passengers in 2018
  • T’way Air: Carrying 7.1 million passengers in 2018
  • Eastar Jet: Carrying 5.9 million passengers in 2018

In recent years these airlines have grown and have become dominant forces in domestic and short-haul international markets.

Jeju Air is S. Korea’s first and largest LCC. Photo: Wikimedia Commons

However, we recently wrote that there are three additional carriers that were granted air operating licenses this past March:

Conclusion

It will be interesting to see how Korean Air will evolve and rise to the challenge of LCCs crowding South Korea’s aviation market. With an extensive international network and strong partnerships (like Skyteam), the legacy carrier will have to find a way to avoid the same financial troubles as Asiana. Have you flown on any of the airlines mentioned above? Do you think Korean Air is right to worry about the competition?

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