The Ministry of Land, Transport and Maritime Affairs (MLTMA) of South Korea just approved the business licenses for three startup airlines. The low-cost carriers Aero K, Fly Gangwon, and Air Premia will begin operations in the aviation market within the next two years.
There are strict guidelines to follow when applying for a business license in the aviation industry. South Korea’s MLTMA takes into consideration several factors before approving. For two out of three airlines, it hasn’t been their first time applying for the license. The biggest reason for prior rejects was due to not meeting the necessary capital requirements. Other requirements include securing aircraft for operation and examining executive qualifications for service.
Now that the airlines have the appropriate government authority approval, they can apply for the Air Operator’s Certificate (AOC) and license. The government’s decision to approve the companies is based on the hope that they will increase competition and innovation in the industry. One of the stipulations of getting approval was that the airlines agreed to maintain operations at their respective hub airports for three years before expanding.
Aero K will be the newest low-cost carrier based in Cheongju, expected to launch in 2019 officially. Aero K has been struggling to get the green light from South Korea’s government to begin its operations, taking the company twice to apply before getting approved.
The initial issue with Aero K was its capitalization. For its first application in 2017, the airline was only able to show approximately $13 Million in funding, causing them to be rejected. The second, approved application was able to demonstrate closer to $50 Million, the required minimum.
Aero K will operate using the Airbus A320. It ordered eight of the aircraft in 2017 but later reduced the order to three. It plans to finance the purchase through a sale-and-leaseback agreement. After a successful launch, the airline will order three more A320’s by 2022.
Fly Gangwon is a low-cost airline that will be based in Yangyang. Although Aero K is entering a competitive market in Cheongju, Fly Gangwon fills a flight route void from Yangyang. Its planes will fly 25 routes to destinations in China, Japan, and the Philippines. Some of the routes introduced by Fly Gangwon will increase flight options for passengers, such as Yangyang to Kitakyushu, Japan, which is only offered by one other airline.
Fly Gangwon also experienced delays when trying to obtain its business license. The airline was rejected twice for the license due to a lack of capital. It has since received capital support from the Gangwon provincial government.
The airline will manage a fleet of Boeing 737-800s. It will expand to operate nine aircraft across the routes by 2022.
Air Premia is the third low-cost air carrier that will be soon introduced to the South Korea market. The airline will focus on many international destinations including Vietnam, the US, and Canada. It plans to use a fleet of Boeing 787-9.
Now that each of the airlines received their approval from the government, they are now in the process of obtaining final licenses and approval before starting their operations. Three new low-cost carriers entering the South Korea market at once seems like an oversaturation, but they each plan to deliver a unique experience for passengers.
Could too many low-cost carriers crowd the market in South Korea?