Published : Nov. 5, 2012 - 20:17
An AirAsia Japan aircraft
A Peach Aviation airplane (Bloomberg)
Boasting super cheap tickets to woo thrifty Korean customers, foreign airlines are rushing into the local market to compete with their Korean counterparts.
Japanese low-cost carrier Peach Aviation launched here in May with a promotion offering one-way tickets from Incheon to Osaka at 30,000 won ($28), all taxes included. The tickets sold out within 48 hours.
AirAsia Japan, a joint venture of Malaysia-based LCC AirAsia and Japanese LCC ANA Japan, also launched here last month with the same strategy: offering one-way tickets from Incheon to Narita for 20,000 won.
The Philippines-based Cebu Pacific, which was one of the first foreign LCCs launched here, has held several promotions offering one-way tickets from Incheon or Busan to Cebu or Manila for 1 peso (27 won). With taxes added, the price came to around 30,000 won. The airline’s website crashed during the latest event held last month, due to congestion.
“Korea has five LCCs, but the costs are not really low or reasonable. I think there is plenty of room in the market for AirAsia to grow,” said Tony Fernandes, CEO of AirAsia, Asia’s largest LCC, at a press conference held last month in Seoul.
The LCC market expanded by 18 percent in the third quarter this year from the previous quarter.
Insiders expect the competition to get even tougher in the final quarter of the year, as foreign LCCs launched here have announced plans to expand routes to include the domestic flights, and more carriers, especially Asia-based budget airlines, are expected to advance into Korea in the near future.
Korean LCCs have started to voice worries that they will lose market share to their new rivals. While most Korean LCC have fewer than 10 planes, AirAsia reportedly owns about 110.
“We cannot offer tickets as cheap as what is offered by AirAsia. It is almost impossible to cope with AirAsia cost-wise, when the company lowers its ticket costs by purchasing planes in large quantity,” said an official at a Korean LCC who wished to remain anonymous.
Amid the influx of cheap tickets, KCA and industry figures advised consumers to be discerning in choosing their airline.
Unlike big carriers, which offer most services free of charge once the passengers are on board, most LCCs charge for beverages and meals served in the plane. Some even charge for blankets. Consumers may also have to pay to reserve seats in advance.
Further, LCCs charge higher cancellation charges and some, including Peach Aviation, do not offer refunds in most cases, even if weather conditions result in a flight cancellation.
Nearly 270 complaints were filed to Korea Consumer Agency during the first eight months of this year, most of them from passengers of foreign LCCs.
“Nothing can be done in most cases because the foreign airlines do not have offices here, and are not subject to warnings,” said an official at KCA.
Most of the LCCs launched here, including AirAsia Japan, Peach Aviation and Cebu Pacific, do not have branch offices here, only sales agencies, which frees them from some government regulations.
By Park Min-young (claire@heraldcorp.com)