Korean Air plans to launch a low-cost carrier within the next three years in response to increased competition from low-cost carriers and to better serve budget travellers.
"A special task force" has been formed and KAL is considering having the low-cost carrier come under the auspices of its sister-company Korea Airport Service, says KAL. Korea Airport Service is primarily an airport ground services company.
The new carrier will launch within the next three years using Boeing 737s and will serve domestic as well as short and medium-haul international routes, it says, adding that it will ply tourist routes.
Meanwhile KAL will continue to be a global carrier focused on "premium business travellers", it says. Three reasons are cited for the decision to establish a low-cost carrier.
In the next two to three years high-speed trains in South Korea will be "completely open for service [so] much of the domestic air traffic demand is expected to shift to the railways", which means KAL has to "develop new markets and business models to effectively use the [737] fleet that will be freed from domestic operations".
KAL also says low-cost carriers around the world have succeeded in catering to tourists and other price-conscious consumers. It says this is a growing segment of the market that it needs to target more effectively.
The third reason it cities is competition from low-cost carriers from overseas, particularly China and South-East Asia. "KAL shall no longer remain indifferent to the invasion by low-cost carriers from China and South-East Asia into the Korean market," the airline says.
KAL accuses foreign low-cost carriers of "dump selling and [offering] unreliable tourism packages" that cause "market disturbance". It says its low-cost carrier will differentiate itself by offering a more reliable service and higher maintenance standards.
The move by KAL to establish its own low-cost carrier comes just weeks after it was revealed that a new privately owned South Korean carrier, Yeongnam Air, plans to launch around year-end using Fokker 100s.
Source: Flight International
