With Parata Air, a domestic low-cost carrier (LCC), beginning scheduled service, nine LCCs are now competing. Each LCC is seeking differentiation strategies such as exclusive routes and expanding routes departing from Busan, but there are concerns that if cutthroat competition intensifies, they could all go under together.
Parata Air began scheduled service on the 30th by operating its first flight from Yangyang International Airport to Jeju International Airport. It will operate one flight per day on the Yangyang-Jeju and Gimpo-Jeju routes, and plans to soon expand its service area overseas, including Southeast Asia. Parata Air was relaunched after the home appliance company WINIX acquired Fly Gangwon and changed the company name.
With Parata Air joining the fray, there are now nine domestic LCCs in total. That is the same number as the United States, the world's largest aviation market. As a new airline enters the LCC market, concerns are growing in the industry. A source in the LCC industry said, "Competition is already so fierce that discounted tickets are offered year-round, and with a new airline coming in, the pressure to cut prices will intensify even more," adding, "An expansion of losses is inevitable."
Four companies listed on the securities market—Jeju Air, T'way Air, JIN AIR, and AIR BUSAN—are expected to post operating losses or reduced operating profit this year.
LCC companies are seeking survival strategies by developing new routes. An LCC industry source said, "Exclusive routes between smaller Japanese cities and Korea can avoid price competition with other companies while also targeting local demand for transfers at Korea's international airports."
T'way Air and Eastar Jet are increasing routes departing from Busan as a way to secure profitability. International flights departing from Busan are still in short supply, and fares can be priced slightly higher than those departing from Incheon and Gimpo. Many consumers in Busan, Ulsan, and South Gyeongsang travel from Busan to Incheon or Gimpo and then board international flights; considering travel time and expense, the calculation is that they will use international flights departing from Busan even if they are slightly more expensive.
The industry expects that if competition intensifies, mergers and acquisitions (M&A) will eventually occur. If Korean Air and Asiana Airlines merge first, their affiliates JIN AIR, AIR BUSAN, and AIR SEOUL will be combined into a single company.
Eastar Jet, invested in by domestic private equity fund (PEF) manager VIG Partners, is also continually the subject of sale rumors. An LCC industry source said, "LCCs are aggressively bulking up to survive. If cutthroat competition continues, involuntary restructuring could also emerge."