A no-frills future for Korean Air in works

Already the country’s dominant air carrier, Korean Air will expand into the budget airline market within two or three years, the company said yesterday.
While no concrete plans were revealed, the company says it will either establish a new subsidiary or utilize its current Korea Airport Service, which has experience in flying commercial planes. In its initial phase, the company is considering the use of Boeing 737s on both domestic and international routes.
Traditionally the domain of upstart carriers out to challenge giants like Korean Air, the budget market here is served by just two tiny carriers, Hansung Airlines and Jeju Air, both of which hope to fly internationally.
“This is proof that budget airlines can be profitable,” said Jeju Air spokeswoman Yoon Ye-jin. “We expect the competition will increase the size of the pie.”
Jeju Air is trying to meet government regulations to allow it to operate international flights and it hopes the Korean Air expansion will help. “If the government is to allow Korea Airport System to fly domestically, then it will have to allow us to fly international routes,” said a Jeju Air employee who declined to be identified.
Korean Air, however, says it does not intend to conflict with the two domestic budget flyers, because its eye is on foreign competition. “Korean Air will no longer remain indifferent to the invasion of low-cost carriers from China and Southeast Asia into the Korean market,” said Lee Seung-ryul, deputy manager of the company. Lee added that budget carriers make up 20 percent of the air travel market in the U.S. and Europe and are expanding quickly in China and Southeast Asia, although few service Korea.
Asiana Airlines, Korean Air’s main local competitor, wasn’t expecting the news. It is “just observing the budget market,” according to company spokeswoman Lee Cha-yeon.
However, experts predict Asiana may suffer. “Asiana’s pan-Asian flights are the cash cow of the company. Korean Air’s new budget arm will want a part of that,” said Lee Un-taek of Daehan Investments & Security.
Experts also say that Korean Air’s domestic sales have been hurt by the two local budget operators.

By Hwang Young-jin Staff Writer [yhwang@joongang.co.kr]