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Established in 2007, Air Busan is an airline based in Beomcheon-dong, Busanjin-gu, Busan, South Korea. The carrier, which is a subsidiary of Asiana Airlines, operates service to destinations in Asia from its base at Gimhae International Airport.
Location of Air Busan main hub (Busan Gimhae Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Air Busan fits the LCC profile and it is included in our reporting on this basis. Please note: when reporting for an airline is changed from or to LCC the historical data is not affected and it can lead to a distortion in the current reported data. Contact us if you have any queries.
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Air Busan reduces domestic fuel surcharge in May-2013, international surcharges unchanged or reduced
17 total articles
South Korea-Japan airline market sees structural change from LCCs, political tension & weakening yen
The once tidy and highly profitable Japan-Korean market is undergoing fundamental change – accompanied by double-digit yield declines.
It is difficult to identify precisely which ingredients are provoking the greatest change in the South Korea-Japan airline market. First, in mid/late 2012 the market was transformed as new airlines entered and others added capacity; these were mainly LCCs with unprecedented low fares. Then late 2012 saw Japanese outbound tourist numbers fall sharply due to political tensions between South Korea and Japan over largely uninhabited but disputed islands.
In 2013 the Japanese outbound market remains soft as the yen weakens. While the international political situation will eventually cool down, the Korean response has been to target individual tourists rather than tour groups, a change that was long overdue in any event.
But the difference now is that those individuals have LCCs to provide for their needs. These carriers are here to stay, and they will grow – for the usual reasons, but also due to the weakening yen. While the economic and political factors favour the Korean side, it is the Japanese side that has a larger share of the market.
One of the highest growth rates in North Asia in 2013 will be from South Korea's Asiana, which is projecting a 9% increase in RPKs. This compares to 4% RPK growth at Korean Air and modest growth from All Nippon Airways and Japan Airlines. Many Chinese carriers will have similar or higher growth, but notably Air China will be lower as it runs out of slots.
The focus in 2013 for Asiana, globally the 54th largest airline based on capacity and sixth largest for intra-Asia international capacity, is regional flights, increasing capacity to cities including Chongqing and Yangon and launching new services to Denpasar and Jakarta. This traffic will help feed its long-haul network, due to commence notable expansion beginning in 2014 as A380s replace 777-200ERs, facilitating their re-deployment to new routes.
As liberalisation and more progressive thinking spreads across North Asia, the region's pan-Asian LCCs are looking at how to have a local presence in South Korea. While South Korea in the middle of last decade became the first North Asian country to see the launch of LCCs, there has been stagnation at the expense of cost bases, creating room for a new LCC with a lower cost base to enter. An effort in 2008 from Tiger Airways to establish Tiger Incheon backfired, which, combined with weak performances at some incumbents, has caused foreign LCC groups to look at acquiring an existing carrier.
AirAsia is understood to have looked but left, leaving Tiger as most likely Asian LCC group to enter the South Korean market because Jetstar is now bedding down growth elsewhere and following from its Vietnam experience does not take a positive view towards acquiring another carrier. Indeed, global examples of LCC mergers are few, but this may be the platform necessary for South Korea.
It has no domestic market like Japan but a thriving international market with surprising numbers of liberalised air services, the spark to generate growth. Whether an acquisition pans out or not, South Korean aviation is in need of a shake-up.
It certainly took North Asia some years to have momentum for low-cost airlines that was anything like booming Southeast Asia. 2012 delivered on that with three new LCCs launching in Japan and plans underfoot in Hong Kong for Jetstar Hong Kong as well as a possible transformation of Hong Kong Express into a LCC. While elsewhere the region may not have gone as far as producing LCCs, there is active discussion of having LCCs and the reforms needed to welcome and support them.
Talk is strongest in Taiwan, which has seen considerable growth from LCCs in North and Southeast Asia. South Korea is considering how and when its LCCs can become better competitors, shedding some of the comforts they have been unwilling to charge passengers. Japan will see growth, from existing LCCs and new ones, a challenge for incumbents. Reforms in China may enable LCCs in the future to launch, while all LCCs are watching how to be hybrid and chase yields. These are eight North Asian LCC topics to watch for in 2013.
South Korea's Jeju Air has undergone a management changeover, with new CEO Kyu Nam Choi at CAPA's LCC and New Age Airlines conference on 05-Sep-2012 giving the message that he brings the wheels of change but with an endpoint that is undetermined and open to influence, be it from airline partners or investors as it considers an IPO in the medium-term.
Such an open tabula rosa strategy is revolutionary but welcome in the stagnating Korean LCC market where carriers, some second-fiddle to parent company interests, are showing a lack of direction as they confront high cost bases and lack of liberalised access. That combination will place the carriers under pressure as foreign LCCs – namely from Japan – enter, likely resulting in the LCCs transitioning from hybrid to more barebones LCC models. The timeframe of this is uncertain, and while it seemed Korea, the original market for LCCs in North Asia, would not promulgate further innovation, Mr Choi may set out to change that – with implications for all the country's carriers.
South Korea was once the heartland – and limit – of LCCs in North Asia, but with the LCC movement gaining pace the country now risks stagnation. That is represented in Air Busan and Jin Air, the respective LCC subsidiaries of full-service carriers Asiana and Korean Air.
Air Busan is the larger of the two and advantaged with a base in its namesake city, a second-tier one that like elsewhere in the region often gets overlooked for service. But inefficiencies have creeped in with an Airbus A321 and Boeing 737 fleet and domestic services competing with high speed rail. Its profits are lower than Jin Air, which has the much larger Seoul and Incheon areas to call home but whose network still plays second fiddle to Korean Air, which will see foreign LCCs further erode its network.
Jin Air, like Air Busan, must be allowed a larger role. Jin Air's advantages will be narrowed as other LCCs make Seoul their first point of call of Korea. Air Busan and Jin Air can maintain the status quo in the short-term, but soon need the shackles taken off.
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