"These days, if you take the night flight to Guam, you hit the jackpot for 'lie-flat economy' (an economy seat where you can lie down because all adjacent seats are empty). There was even a time when only 43 people boarded out of 338 seats, and on weekdays this is an everyday sight." (Korean Air flight attendant A)
Flag carriers' Incheon-Guam route is suffering from oversupply. With demand down, Korean Air increased its flight frequency. It happened to meet the conditions for its merger with Asiana Airlines, but the impact is spreading to other low-cost carriers (LCCs). Some say the merger conditions should be applied with some flexibility.
According to the Aviation Information Portal System on the 27th, the load factor on the Incheon-Guam route from August, when Korean Air began adding flights, through last month averaged only 47%. The load factor on the Busan-Guam route, which began operating during the same period, was also just 45%.
During the same period, Korean Air's Guam route load factor was also significantly lower than major routes departing Incheon such as Los Angeles, London, Osaka, Paris, and Sydney. From August to October this year, the average load factors on those routes were ▲ Los Angeles 87% ▲ London 90% ▲ New York 93% ▲ Osaka 86% ▲ Paris 91%.
The low load factor on Korean Air's Guam route is due to reduced passenger demand caused by the strong won-dollar exchange rate and aging tourist facilities. Based on airlines' summer season (April-October), the number of Guam passengers fell 45%, from 690,000 in 2019 to 380,000 last year.
Amid this, Korean Air increased the Incheon-Guam route from 14 weekly flights to 21 in August, and JIN AIR, its affiliated low-cost carrier (LCC), raised its frequency from 7 to 14 per week, which also had an impact. AIR BUSAN, an Asiana Airlines-affiliated LCC, began twice-daily Busan-Guam service this month.
Despite weaker travel demand, the aviation industry sees Korean Air's decision to add Guam flights as being due to the Fair Trade Commission's conditions for approving the business combination. When the commission approved the business combination of Korean Air and Asiana Airlines in December last year, it ordered that capacity on 40 routes, including Guam, be maintained at 90% of 2019 levels.
However, on the Incheon-Guam route, Korean Air operated only 545 flights from January to July this year, 36% fewer than the same period in 2019. After the corrective-measures compliance oversight committee, composed of the Fair Trade Commission and the Ministry of Land, Infrastructure and Transport, took issue with this and conducted actions such as imposing a compulsory performance penalty and an on-site inspection, the airline hurriedly increased seats. It means that if an appropriate capacity level had been maintained since the start of the year, the current situation would not have occurred.
Some argue that flexibility is needed in the capacity maintenance obligation. The commission's measure applies to 40 routes where Korean Air has a high share, including Guam, and all those routes must maintain 90% of 2019 capacity. The point is that such measures can cause oversupply on some routes and harm other airlines, so there should be room to adjust them.
In fact, as Korean Air increased capacity, other LCCs operating the Guam route exited the market. On the Incheon-Guam route, Jeju Air and T'way Air had been operating with cancellations and reductions to match demand, but they ultimately gave up flying the route.
Jeju Air stopped operating the Incheon-Guam route last month, and T'way Air will stop operating the Incheon-Guam route starting in December. As a result, the only airlines now operating the Incheon-Guam route are Korean Air, JIN AIR, and AIR SEOUL, all affiliates of Korean Air.
Effectively, it has become a route monopolized by Korean Air, but fares are below the published rates due to weak demand. According to the Incheon-Guam fare guide updated by Korean Air early this month, even the lowest booking class round-trip economy fare is 578,200 won in the off-season. However, the Incheon-Guam route currently on sale can be booked for around 400,000 won round trip.
On the Busan-Danang route, AIR BUSAN and JIN AIR also added flights in August, leading Jeju Air to halt operations. As there are side effects to the commission's measure, voices in the industry say the ratios should be adjusted or alternatives devised to allow fulfillment of obligations on other routes.
An airline industry official said, "The current 'Guam lie-flat economy' phenomenon arose because Korean Air affiliate airlines suddenly deployed wide-body aircraft in the second half, increasing supply," adding, "Korean Air may be struggling because it cannot reduce supply on unprofitable routes, but since the LCC sector is also being hurt, there are opinions that the capacity maintenance obligation needs adjustment."
Regarding this situation, the Fair Trade Commission said, "The corrective measures were designed so that Korean Air can request changes in the event of rapid market changes or unavoidable changes in circumstances," adding, "We are communicating with relevant ministries and the aviation industry, including by guiding Korean Air on the flexibility clause."