Posted December. 07, 2013 08:11,
Domestic airliners are under extreme tension as middle-east airlines and several low-cost carriers (LCC) show a strong intention to enter the Korean aviation market.
According to an aviation industry source on Friday, the Land, Infrastructure and Transport Ministry will have a meeting with the United Arab Emirates aviation authorities in ICAO Air Services Negotiation Conference, or ICAN, to be held from this coming Sunday through next Thursday at Durban, South Africa. In the conference, the United Arab Emirates is expected to request liberalization or extension of flight frequency between two countries. The Middle Eastern country requested the expansion of flight frequency at the conference in 2011, but Korea did not accept the offer.
The reason why the United Arab Emirates requested the expansion is to attract Korean passengers who travel to Europe or Africa via Dubai or Abu Dhabi. Compared with Korean airlines, airlines of the United Arab Emirates are currently increasing market share with low pricing strategy for destinations in Europe and Africa. As of Friday, the minimum round-trip ticket price of economy seat between Incheon and Paris in Korean Air is 1,720,700 won (1,178 U.S. dollars), but the same ticket price for Incheon-Dubai-Paris flight in Fly Emirates is 1,112,700 won (770 dollars), or 67 percent of the price of Korean Air.
After 2009 ICAN conference, Korea and the United Arab Emirates can operate 15 weekly flights between both countries. Fly Emirates and Etihad Airways operate seven weekly flights between Incheon and Dubai, and between Incheon and Abu Dhabi, respectively. In contrast, out of all Korean airlines, only Korean Air operates five weekly flights between Incheon and Dubai.
A source in Korean Air said, "Since 2009, passenger numbers using Korean airlines for European air routes have decreased. With more frequent flights between Incheon and their cities by Middle East airlines, Korean airlines have no choice but to lose competitiveness for European and African air routes."
Domestic low-cost carriers also pay a keen attention to the moves of Malaysian low-cost airline Air Asia, number one LCC in Asia. Air Asia Chairman Tony Fernandes visited the Land, Infrastructure and Transport Ministry on November 18 and explained the plan to make inroads into the Korean aviation market. An official in the ministry said, "Air Asia expressed the plan to launch its new LCC, not taking over an existing domestic LCC". Under current regulations, however, foreigners cannot take more than 49 percent share for Korean airline companies. Due to this, domestic aviation industry predicts Air Asia is likely to make an alliance with a Korean company.
In case Air Asia gets into the Korean market in earnest, domestic LCCs is highly likely to be hampered. An aviation industry source in Korea said, "Air Asia recently made the contract to purchase 200 flights with Air Bus. It is impossible for small domestic LCCs to survive price war against such a huge company."