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Air Busan enters the highly-competitive (and unprofitable) South Korean market

3-Nov-2008
  • Air Busan enters the highly-competitive South Korean market.

South Korea's newest LCC, Air Busan, commenced domestic operations on 27-Oct-08, with the ultimate goal of launching international operations in 2H09.

The Air Busan Co, which is jointly owned by Asiana Airlines, the Metropolitan Government of Busan, and the Busan Chamber of Commerce and Industry, commenced commercial operations on 03-Nov-08 with an inaugural service from Gimhae International Airport in Busan to Gimpo Airport, West of Seoul.

The airline plans to offer 19 daily services on the Gimhae-Gimpo route, which it will operate under a codeshare arrangement with Asiana Airlines. The company also plans to commence Busan-Jeju services on 01-Dec-08, again under a codeshare with Asiana Airlines.

Air Busan commenced operations with a fleet of two B737-500s acquired in Aug-08. The carrier will add a third B737-500 in Nov-08, prior to the commencement of Busan-Jeju services. In 2009, the carrier plans to take delivery of two B737-400s, in Apr-09 and Jun-09, prior to the commencement of international services in 2H09 (to China and Japan), after it fulfils the necessary operational requirements under South Korean regulations.

Air Busan CEO, Kim Soo-cheon, stated Air Busan is seeking to become a regional carrier that is distinct from other LCCs that have entered the South Korean market in recent years. While ticket prices would be 10-15% lower than Asiana and Korean Air, the airline plans to offer a higher quality of services than rival LCCs, with such a strategy possible "because of the close cooperation between Air Busan and Asiana that will provide trained personnel and safety guidelines".

Air Busan was established in Aug-07 by the Busan City Government, in cooperation with a group of 12 Busan-based investors. Asiana acquired 46% of the airline in Feb-08, for USD24 million. The Busan City Government has also invested USD2.8 million under the agreement, raising total capital from USD25.9 million to USD52.9 million. The carrier had previously planned to launch service in Jun-09, although this was brought forward, to enable Asiana to better defend its market share ahead of a surge in new entry. Rival, Korean Air, launched its own budget airline, Jin Air, on 17-Jul-08, after stating in Jun-07 that it "will no longer remain indifferent to the invasion of low cost carriers from China and Southeast Asia into the Korean market".

Air Busan

  • Launched in Jul-07 by the Busan City Government, in cooperation with a group of 12 Busan-based investors;
  • Asiana acquired 46% of the airline in Feb-08, for USD24 million, and changed its name to Air Busan. The Busan City Government has invested USD2.8 million under the agreement, raising total capital from USD25.9 million to USD52.9 million;
  • Plans to take delivery of a third B737-500 in Nov-08, with two B737-400s to be delivered in Apr-09 and Jun-09.

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