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South Korea has an extensive flight network operated by the national airline Korean Air as well as other airlines. Incheon International Airport (ICN) is the largest airport in South Korea and the primary airport serving Seoul. ICN is the main hub for Korean Air, Asiana Airlines and Polar Air Cargo, and widely serviced by international carriers. Korean Air was founded by the government in the early 1960’s to replace Korean National Airlines and has been privately owned since the late 60’s. The Korea Transportation Safety Authority (KOTSA) is the transportation safety authority of the government of South Korea – which is responsible for air traffic safety and standards.
Airports in South Korea
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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.
Asiana aims to significantly expand capacity on US routes after it becomes the sixth Asian and second South Korean carrier to operate the A380 in 2014. Asiana has six A380s on order and plans to initially deploy the super jumbo on long-haul routes to Los Angeles and New York as well as on some dense regional routes within north Asia such as Hong Kong, Shanghai Pudong and Tokyo Narita.
Frankfurt is the most likely destination for Asiana’s last batch of A380s, which will not be delivered until 2017. While the carrier does not plan to open any new routes with its A380s, the new type will free up Boeing 777-200ERs to launch new destinations in Europe and North America. Asiana’s long-haul network is currently limited to only six destinations in North America and three in western Europe, making it a much smaller long-haul carrier than local rival Korean Air (KAL). Asiana also has 30 A350s on order for delivery from 2017 but these aircraft are intended for regional routes within Asia-Pacific.
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.
Jetstar Japan became on 03-Jul-2012 the second low-cost carrier to launch domestic services in Japan this year, ushering in a new era not only for Japan but wider North Asia, where progressive policies and support for LCCs have been few.
Coupled with a flurry of recent open skies agreements, Japan’s influence on North Asia will grow as Jetstar Japan targets the launch of international flights from 1H2013 to countries including China, the Philippines, South Korea and Taiwan.
Jetstar Japan will be the last of the new LCCs to launch international services, with Peach having commenced international services in May-2012, two months after its domestic launch, and All Nippon Airways JV AirAsia Japan planning international flights from Oct-2012, two months after its Aug-2012 domestic launch. As the carriers, and Jetstar Japan in particular, grow internationally, the region will change at a greater rate than some incumbent airlines and countries have the bandwidth to support.