LCC penetration in domestic South Korean market reaches new highs but at what cost?

South Korea's five major LCCs held an aggregate domestic market share of 42.3% in 3Q2011 in the third quarter of 2011, up from the 40.3% in the six months to Jun-2011 (1H2011), which itself was a new record for LCC penetration in the North Asian nation. This penetration, as confirmed by South Korea's Ministry of Land, Transport and Maritime Affairs, marks a significant rise from a combined market share of just 9.7% three years ago.

However, profitable growth remains a continued challenge for South Korea's LCCs. In 2008, two LCCs in the market, namely Hansung Airline and Yeongnam Air, collapsed amid challenges economic conditions, high fuel costs, a weakened Korean won and funding challenges amid the global economic financial crisis. Among those left standing, losses were heavy, with the nation's four LCCs in 2009 - EastarJet, Jeju Air, Jin Air and Air Busan, reporting combined losses in excess of USD55 million in 2009.