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Formerly known as Air Korea, Jin Air is a low-cost carrier based in Seoul, South Korea. The carrier, which is wholly owned by Korean Air, operates a network of services within South Korea and Asia out of its main base at Gimpo International Airport.
Location of Jin Air main hub (Jeju Airport)
LCCs will continue to evolve into hybrids of the original core model. CAPA and OAG consider Jin Air 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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As CAPA's LCCs and New Age Airlines Sep-2013 conference in Seoul clearly identified, the wheels are starting to turn in Korea, the home of the first LCCs in North Asia. But more recently it has suffered from stagnation as carriers do not offer a cost base that is competitive with other LCC developments in the region. Jin Air is the country's second largest LCC and wholly-owned by Korean Air. This brings advantages but also disadvantages, as CEO Won Ma said at the CAPA conference. Mr Ma sees that Jin Air needs to improve its cost base and has started to charge for small ancillaries, but not luggage. Jin Air also incurs higher costs from using some Korean Air services.
2012 was Jin Air's third year of profits, which were very respectable given the industry but lagging considering Jin Air's modest network, with limited competition. But the Jin Air-Korean Air relationship is far ahead of Asiana and its partially-owned LCC unit Air Busan, struggling to remain relevant up against Jin Air and the the even larger Jeju Air, Korea's largest independent LCC. If Jin Air, like other LCCs, can make very necessary cost structure reforms, there are increasing opportunities as the Korean outbound market grows, thanks to the strengthening of the won. It is time now more than ever to apply more pressure on the accelerator.
Korean LCCs are increasing their market share, accounting for 10% of the international market and just under 50% in the much smaller domestic arena. But they are still passing up numerous opportunities, and these are becoming more apparent and with greater impact as LCCs increase in North Asia, notably Japan.
Two – Air Busan and Jin Air – are tethered to their full-service parents while independent Jeju Air has done comparatively well and preparing for an IPO to advance growth. But smaller independent LCCs Eastar Jet and t'way are still moving up. They straddle the low-cost and full-service spectrum, being closer to low fare than low-cost airlines. While they argue the Korean market is not ready for LCCs, they know they must move as international competition intensifies. They only need to look at Japan's Peach, which is finding success in another market once thought to be too sensitive for LCCs. AirAsia Japan's failure is a reminder that finding the nuances and achieving balance between management style, market demand and the balance sheet is not easy.
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.
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.
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