ID :
136031
Tue, 08/03/2010 - 22:14
Auther :

(News Focus) Foreign low-cost carriers tapping S. Korean market


By Nam Kwang-sik
SEOUL, Aug. 3 (Yonhap) -- Southeast Asian low-cost carriers are scrambling to
break into the South Korean budget airline market as local demand for overseas
travel increases sharply, analysts said Tuesday.
Business Air, a Thai budget carrier, has started providing flight services on the
route between Incheon, South Korea's main gateway, and Bangkok, the capital of
Thailand, from March.
AirAsia, Asia's largest low-cost carrier, plans to offer flight services on the
route between Incheon and the Malaysian capital of Kuala Lumpur starting in
November, while Orient-Thai Airlines, a Thai low-cost carrier, will fly between
Incheon and Bangkok from December.
"A sharp rise in demand for air travel is the main reason behind foreign low-cost
carriers starting flight service in South Korea," said Shim Min-seok, an analyst
at Daewoo Securities Co.
The number of South Korea's outbound travelers rose 32.7 percent to 5.93 million
in the January-June period from 4.47 million a year ago, according to the Korea
Tourism Organization (KTO).
The recent growth in the number of South Koreans who travel overseas contrasts
with the very weak demand between 2008 and 2009, which was due to a combination
of the global economic downturn and the spread of the new flu, the KTO said.
A rise in the number of foreign low-cost carriers in the local discount airline
market is predicted to drive South Korean budget carriers to compete with their
foreign counterparts in airfares, analysts said.
AirAsia plans to sell its tickets at prices up to 30 percent lower than other
discount carriers in South Korea, Azran Osman-Rani, chief executive of AirAsia X,
a unit of AirAisa, said in a meeting with reporters held here on Monday.
"The expansion of the foreign low-cost carriers' presence in South Korea is
expected to spark the fare competition with local discount airlines," said Park
Eun-kyung, an analyst at Samsung Securities Co.
As of August, four discount carriers were providing overseas flight service on
short- and mid-haul routes such as those to Southeast Asian countries, Japan and
China.
Jeju Air Co., the nation's biggest budget carrier, has been offering
international flights to Osaka and Kitakyushu as well as to Bangkok.
Jin Air Co., a wholly owned unit of the nation's biggest full-service carrier,
Korean Air Lines Co., opened its first overseas route linking Incheon to Bangkok
in December 2009.
Eastar Jet Co., another local budget airline, started flying to Kota Kinabalu, a
major tourist destination of Malaysia, last month.
Air Busan has been providing flights between Busan, South Korea's largest port
city, and Osaka and Fukuoka in Japan since April.
Strong demand for air travel, however, will cushion the profits of local low-cost
carriers from the blow of the fierce fare competition, analysts said.
"I think that the foreign low-cost carriers' recent entry into the South Korean
market will have little impact on earnings of the local discount carriers as
demand for air travel has been on the rise," said Yoon Hee-do, an analyst at
Korea Investment Securities Co.
He also said the profits of the local full-service carriers -- Korean Air and
Asiana Airlines -- will not be affected by the foreign budget carriers as their
sales from routes to Southeast Asian countries take up only 0.5 percent of total
revenue.
The analysts predict chances are very high that more foreign discount carriers
will make inroads into the local discount airline market as they did between 2005
and 2007 before the 2008 global economic crisis originated in the U.S.
ksnam@yna.co.kr
(END)

Delete & Prev | Delete & Next

X