LCCs rapidly grow to account for 30% of Japan-Korea market. Full-service airlines need new strategy

In six years, low-cost carriers have carved out 30% of the Japan-Korea market, the world's 14th largest country-pair and fifth-largest in Asia. The overall market is growing, but with full-service carriers reducing capacity. 2015 is the third consecutive year of full-service capacity declines. Korea's independent LCC, Jeju Air, has captured 9% of the overall market. Korean carriers account for 85% of capacity, the result of their lower cost base compared to Japanese carriers and their ability to serve more Japanese points from one or two Korean hubs.

There are dual-brand strategies in the market that have seen full-service airlines hand routes to their LCC, fly alongside their LCCs, or have the LCC launch entirely new services. Overall, however, the strategies are hardly thoroughly integrated. Asiana intends to make Japan a large focus of its proposed LCC Air Seoul, which would finally give it a LCC presence in Korea's largest market (Asiana's existing LCC Air Busan is in Busan and does not fly internationally from Seoul). But a series of safety incidents have delayed Air Seoul, creating an opportunity for competitors to step up their competitive growth - if they can seize the moment.