As 10 routes with antitrust concerns are being released to the market following the Korean Air-Asiana Airlines merger, domestic low-cost carriers (LCCs) are locked in an intense game of nerves to secure prime routes. They plan to prioritize the Incheon-Jakarta route, which can be operated stably thanks to tourism and business demand. They are also crunching the numbers until the last minute to assess the strategic value of international routes such as those to the Americas and of domestic routes.
According to the airline industry on the 10th, the Korean Air-Asiana Airlines merger implementation oversight committee under the Fair Trade Commission (hereinafter the oversight committee) will close applications for route reallocation at 6 p.m. that day.
In Dec. last year, when the Fair Trade Commission approved the merger of Korean Air and Asiana Airlines, it ordered the transfer of traffic rights and slots for 34 routes that could lead to monopolies to other airlines within 10 years, and 10 of those routes are now coming to market. Traffic rights are the rights to operate routes to a particular country, and slots are the time rights to take off and land in a specific time band. Airlines that take these will be able to operate the relevant routes for at least two years.
The 10 routes transferred this time are as follows: ▲ Four to the United States (Incheon-Seattle, Incheon-Honolulu, Incheon-Guam, Busan-Guam) ▲ One to the United Kingdom (Incheon-London) ▲ One to Indonesia (Incheon-Jakarta) ▲ Four domestic routes (Gimpo-Jeju, Jeju-Gimpo, Gwangju-Jeju, Jeju-Gwangju), among others.
Among these, the Incheon-Honolulu and Incheon-London routes have been selected by U.S. and U.K. competition authorities for Air Premia and Virgin Atlantic, respectively. For domestic routes, tickets are often purchased one-way, so unlike international routes, the route is categorized by the point of departure even if the path is the same. The Incheon-Jakarta route has been released with both traffic rights and slots bundled, while the remaining routes can be operated with slots alone.
The route that LCCs have their eyes on most is undoubtedly Incheon-Jakarta. Korean Air and Asiana Airlines currently operate seven times a week each, and the airline that takes the route this time can operate five times a week. An LCC official said, "Jakarta has tourism demand as well as business demand from Korean conglomerates such as Hyundai Motor," adding, "Unlike Bali and other destinations, it is a route that can be operated stably without peak and off-peak seasons." Another LCC official said, "Other routes being released this time are already highly competitive, but the Jakarta route can only be operated with traffic rights, so there is less concern about cutthroat competition," adding, "Virtually all LCCs will apply for the Incheon-Jakarta route."
LCCs are debating strategies until the last minute to highlight each carrier's strengths as much as possible in the review. For example, Eastar Jet Co. is said to emphasize that it owns 10 B737-8 aircraft, the most among LCCs, that can fly to Jakarta. This would allow it to respond even if an emergency arises. Unlike Jeju Air and T'way Air, which are sending aircraft to Bali, Eastar Jet Co. does not yet have Indonesian traffic rights, which could also be considered in the review process.
Other LCCs are aiming to score points in the category of sustained operation by emphasizing financial stability, such as the level of support from parent companies. LCCs that operate many international routes departing from Cheongju, Busan and Jeju expect that their contribution to activating regional airports will help them win traffic rights this time. An LCC official said, "Most LCCs operate under similar conditions, so it is not easy to differentiate," adding, "We are continuing to review our strategy."
There is also interest in which LCC will secure the Incheon-Seattle route. Among domestic LCCs, Air Premia is focused on the Americas, and in the industry, there is talk that T'way Air could enter the North American mainland by securing this route. T'way Air's long-haul routes are mainly concentrated in Europe, and in the Americas it operates only Guam, Saipan and Vancouver. As Asiana Airlines and others have recently increased seat supply to Europe, profitability in that region has fallen sharply, so T'way Air needs a breakthrough. However, an LCC official said, "In the case of the Incheon-Seattle route, securing slots is not particularly difficult," adding, "It is not a route that needs to be rushed."
Meanwhile, the Incheon-Guam and Busan-Guam routes are expected to see undersubscription. Due to recent oversupply on these routes, Jeju Air and T'way Air, which had existing slots, have also suspended operations. For domestic routes, Gimpo-Jeju with 74 weekly flights (winter schedule) and Gwangju-Jeju with 14 weekly flights, among others, are subject to reallocation, and these routes are expected to be divided among several LCCs. The selection results are scheduled to be announced around the end of next month after a review by the Ministry of Land, Infrastructure and Transport (MOLIT) next month.