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International seats taken by budget carriers top 22% in Korea

2017.01.01 13:35:01 | 2017.01.02 13:11:32
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South Korea’s low-cost carriers (LCCs) are thriving and poised for further growth, as air travelers opt for cheaper alternatives amid a protracted slowdown in the economy that has led their long-haul rivals to struggle to turn a profit.

According to government data on Friday, the share of international seats taken by the country’s budget carriers came to 22.1 percent in November. The number of passengers traveling by budget carriers in the same month also jumped 51 percent from a year ago to 1,279,506.

The share of LCCs in international routes has grown from 8.4 percent in 2012 (as of November) to 12 percent in 2014 and 16.2 percent in 2015. During the peak season in August in 2016, their market presence topped 20 percent.

In contrast, the country’s major long-haul carriers - Korean Air Lines and Asiana Airlines - saw their market share slide to 44.1 percent in 2016 from 50.0 percent in 2014.

LCCs will find no difficulty in steady growth towards the 30 percent level in the share of international seats in Korea, a market expert predicted, adding the local LCC international market that was formed just four years ago will grow at a fast pace for the next seven to eight years.

An unnamed official from the country LCC Jeju Air attributed the recent surge in LCCs’ share in international routes to the growing trend among air travelers seeking affordable flights that provide only necessary services.

In domestic routes, LCCs are already dominating the market with a total 56.6 percent market share, elbowing out Korean Air and Asiana Airlines whose combined share stands at 43.4 percent.

With a business model based on cheap air tickets and reduced operating costs, budget carriers take rank with long-haul rivals in profitability. Five LCCs - Jeju Air, Jin Air, T`way Airlines, Eastar Jet and Air Busan - are expected to rake in more than 2.5 trillion won ($2.08 billion) in sales in 2016, according to the Korean market data provider FnGuide.

Their combined operating margin may exceed 7 percent in 2016, close to 7.9 percent estimated to be achieved by Korean Air and Asiana Airlines in the same year, a sea change from 2012 when the five budget airlines were plagued by chronic losses.

By Kim Jung-hwan

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]

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