Seoul - South Korea's airline industry is being reshaped by the launch of low-cost carriers that aim to gain broader access to new destinations in China, Japan and Southeast Asia. In the past two years, two new low-cost South Korean carriers have taken off, and eight more are preparing to launch with their eyes set on the potentially lucrative Asian routes.
"After two years of meaningful domestic operation, we are preparing to launch the first international flight sometime around this September," said Hong Geun-Hwa, a spokeswoman at Hansung Airlines.
Hansung Airlines was the country's first budget carrier, launched as a domestic route in August 2005 connecting Seoul and the southern island of Jeju in 2005.
She added that the airline is preparing for the delivery of five big airplanes from an unidentified company so that they can be put into its new international service.
"The first destination may be Japan, to be followed by Southeast Asia or China," the spokeswoman added.
Hansung Airlines runs a fleet of four 70-seat airliners that it bought from ATR, an affiliate of Airbus, for its domestic Seoul-Jeju route.
After its domestic launch in June, 2006, the second budget airline, Jeju Air, is also preparing to stretch out into Asian market.
Jeju Air has placed a 363-million-dollar order for five B737-800 planes from Boeing, the airline said early this week. Jeju Air said it will lease an additional 10 aircraft by 2013 for an undisclosed sum.
"We will be putting B737-800s on our new international routes sometime after June 5 this year, as soon as we have got the license from the government," Ko Young-sub, Jeju Air's chief executive said in a statement.
Besides these two, there are eight other budget carriers preparing to take off, pending government approval.
One of them, Tiger-Incheon Airlines, a joint venture between the country's local Incheon city government and Singapore's Tiger Air, will take to the skies as soon as it receives its license.
Another is a spin-off budget carrier from Korean Air, tentatively named Air Korea. Korean Air recently confirmed its plan to establish Air Korea in the next month.
Meanwhile, the government has moved to put the brakes the rapid growth of the budget airlines' international plans. In December the Ministry of Construction and Transportation issued a regulation making it mandatory for a budget carrier to be in domestic operation for at least two years and to have a record of at least 20,000 flights to qualify for the license for international flights.
Under this regulation, only Hansung Airline and Jeju Air are qualified to take off on international flights this year.
Air Korea will have to wait two years to launch, under the government edict.
The regulation has triggered a buzz of speculation in recent weeks about a possible merger between Korean Air and Hansung Airlines.
"It is a groundless rumour," insists Jeong Han-Sung, a spokesman at KAL.
Despite the regulation, KAL has set its own Asian roadmap. "Air Asia is aiming at most of Asian routes, including Japan, Thailand and Malaysia. And we are targeting the Asian launches to be sometime around May 2009," Jeong said.
But faced with regulatory problems and looming rivalry with other budget carriers, KAL may be tempted to merge with another domestic budget carrier.
"It could make a win-win deal if Korean Air merges with one of the Korean budget carriers so that it can make a faster Asian launch without having to wait," said Lee Sung-Joo, a stock analyst at cable TV broadcaster e-Tomato.
When the two budget carriers launched their inaugural flights in 2005 and 2006, they were greeted skeptically in South Korea, where even legacy carriers are usually unable to lucratively operate their domestic routes.
The new carriers had trouble attracting qualified personnel as well as passengers.
"It is hard to scout qualified pilots," one budget carrier executive admitted.
A KAL spokesman said there has been little change in the company's domestic loading factor since the launches of the two existing budget carriers. This is despite Jeju Air's fare of 47,400 won, or 50 US dollars, for tickets for its Jeju-Seoul route, against 88,600 won offered from KAL or Asiana Airlines.
"I'd rather pay some extra money (for KAL)," said Hong Kyung-Sun, a professor in Jeju Island who takes monthly flights to Seoul. "I feel more comfortable with a full-service carrier and I don't want to spend extra time for Internet surfing or phone waiting (for budget carriers)," she added.
But budget-minded Chinese visitors may think differently. About 1.2 million Chinese visited South Korea last year, and many of them took domestic flight between Seoul and Jeju Island.
"We are beginning to take a growing number of package tourists from China," said Hong Geun-Hwa of Hansung Airlines.
