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(News Focus) Foreign low-cost carriers tapping S. Korean market
By Nam Kwang-sik
SEOUL, Aug. 3 (Yonhap) -- Southeast Asian low-cost carriers are scrambling to break into the South Korean budget airline market as local demand for overseas travel increases sharply, analysts said Tuesday.

   Business Air, a Thai budget carrier, has started providing flight services on the route between Incheon, South Korea's main gateway, and Bangkok, the capital of Thailand, from March.

   AirAsia, Asia's largest low-cost carrier, plans to offer flight services on the route between Incheon and the Malaysian capital of Kuala Lumpur starting in November, while Orient-Thai Airlines, a Thai low-cost carrier, will fly between Incheon and Bangkok from December.

   "A sharp rise in demand for air travel is the main reason behind foreign low-cost carriers starting flight service in South Korea," said Shim Min-seok, an analyst at Daewoo Securities Co.

   The number of South Korea's outbound travelers rose 32.7 percent to 5.93 million in the January-June period from 4.47 million a year ago, according to the Korea Tourism Organization (KTO).

   The recent growth in the number of South Koreans who travel overseas contrasts with the very weak demand between 2008 and 2009, which was due to a combination of the global economic downturn and the spread of the new flu, the KTO said.

   A rise in the number of foreign low-cost carriers in the local discount airline market is predicted to drive South Korean budget carriers to compete with their foreign counterparts in airfares, analysts said.

   AirAsia plans to sell its tickets at prices up to 30 percent lower than other discount carriers in South Korea, Azran Osman-Rani, chief executive of AirAsia X, a unit of AirAisa, said in a meeting with reporters held here on Monday.

   "The expansion of the foreign low-cost carriers' presence in South Korea is expected to spark the fare competition with local discount airlines," said Park Eun-kyung, an analyst at Samsung Securities Co.

   As of August, four discount carriers were providing overseas flight service on short- and mid-haul routes such as those to Southeast Asian countries, Japan and China.

   Jeju Air Co., the nation's biggest budget carrier, has been offering international flights to Osaka and Kitakyushu as well as to Bangkok.

   Jin Air Co., a wholly owned unit of the nation's biggest full-service carrier, Korean Air Lines Co., opened its first overseas route linking Incheon to Bangkok in December 2009.

   Eastar Jet Co., another local budget airline, started flying to Kota Kinabalu, a major tourist destination of Malaysia, last month.

   Air Busan has been providing flights between Busan, South Korea's largest port city, and Osaka and Fukuoka in Japan since April.

   Strong demand for air travel, however, will cushion the profits of local low-cost carriers from the blow of the fierce fare competition, analysts said.

   "I think that the foreign low-cost carriers' recent entry into the South Korean market will have little impact on earnings of the local discount carriers as demand for air travel has been on the rise," said Yoon Hee-do, an analyst at Korea Investment Securities Co.

   He also said the profits of the local full-service carriers -- Korean Air and Asiana Airlines -- will not be affected by the foreign budget carriers as their sales from routes to Southeast Asian countries take up only 0.5 percent of total revenue.

   The analysts predict chances are very high that more foreign discount carriers will make inroads into the local discount airline market as they did between 2005 and 2007 before the 2008 global economic crisis originated in the U.S.