Korean Air losing domestic marketshare but dual-brand strategy with Jin Air helps limit the decline

This is a difficult period for Korean Air. Its now infamous 05-Dec-2014 return to the gate in New York JFK over how VP Heather Cho was served macadamia nuts occupied the headlines in Korea and the story remains ongoing. The incident symbolised growing concern over the power of Korea's chaebols. There are significant repercussions. Ms Cho was given a one year jail sentence and a Korean Air unit is likely to lose contract work.

But any impact to the airline's core business is so far unclear. Many have cited Korean Air's drop in domestic traffic in Dec-2014 as a possible public backlash, but Korean Air's domestic traffic had been declining all year - and, in fact, for nearly a decade as liberalisation saw Korean Air lose its previously powerful grip. In 2005, prior to the entrance of Jeju Air that started Korea's LCC wave, Korean Air carried 11.4m domestic passengers and had a 66% market share. Korean Air has been able to use its LCC affiliate Jin Air to limit the decline. In 2014 the two carried 9m passengers, for a 36% share. Korean Air alone carried 6.8m for a 27% share. Meanwhile Jin Air will deploy its 777 in the domestic Korean market, likely a measure as it waits for international opportunities.