Land ministry plans reform to regulate low-cost carriers

The Ministry of Land, Infrastructure and Transport will strengthen regulations on low-cost carriers (LCCs).

In 2008 the ministry relaxed regulations governing LCCs in an attempt to encourage growth in a market that, at the time, was relatively small. However, a group of advisers in the aerospace industry suggested in December that existing regulations are no longer adequate for the changed market environment where new players now face cut-throat competition.

Once the bill is passed, companies that request LCC licenses will be required to have at least 30 billion won ($28.2 million) in initial capital and more than five planes. Set in 2008, the current criteria is 15 billion won in capital and three planes.

The reform plan will also make it easier for the ministry to step in and monitor low-profit LCCs. The government will be able to obligate LCCs to improve their financials if their capital impairment - the extent to which actual assets are worth less than the value of shares - exceeds 50 percent for two consecutive years.

By Song Kyoung-son