Competition heats up among S Korea's budget carriers

Competition heats up among S Korea's budget carriers

Competition in South Korea's budget airline industry is heating up as rival carriers are eager to increase their flight routes or raise more money for business expansion.

Among the big players, Jin Air has laid out aggressive expansion plans while Jeju Air is strengthening its top position with an initial public offering in the fourth quarter.

Jin Air, the low-cost carrier of Korean Air, unveiled its annual plan to become the first domestic budget airline to launch long-haul international routes and add six more aircrafts to its existing fleet of 13 planes by end-2015.

"This year will be an important year for Jin Air and the LCC industry, as well as the company will be upgraded in both quality and quantity," Jin Air's chief executive officer Ma Won said.

This year, the budget carrier is aiming higher with an ambitious goal to record a surplus for the sixth consecutive year.

Jin Air expects to achieve 2015 sales of 501 billion won (S$619 million) and operating profit of 23 billion won, up 43 per cent and 36 per cent year-on-year, respectively.

The industry leader Jeju Air, logged 510 billion won in sales in 2014 and aims to increase sales to 640 billion won this year, according to the company.

Jin Air plans to add four of B737-800 passenger jets and two B777-200ERs to chase the front-runner.

The wide-body, long-range jet B777-200ER can seat up to 393 people, compared to the 160-190 people that can be hauled by smaller aircraft used by local LCCs.

"Jin Air will be the No. 1 budget carrier by the end of this year in terms of the number of flight seats. Although Jeju Air will have more aircrafts than us, we will have more seats," a spokesman of Jin Air told The Korea Herald.

With the new larger planes, the carrier will start flying from Incheon to Honolulu, Hawaii, in December which will be the first time for a local low-budget carrier to launch a long-haul international route.

The company will also focus on expanding international routes from Busan to Fukuoka, Bangkok, Hong Kong and Manila this year.

Jin Air's latest move to increase the number of flights from Busan is a huge challenge for Air Busan, Korea's second largest LCC after Jeju Air, which is based in the port city and plies mostly on the domestic Seoul-Busan route.

"Excessive competition could cause security and service risks as it could escalate price wars," an Air Busan official said.

Air Busan is also planning an IPO to raise much-needed capital to expand its business but the official schedule has not been announced.

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