April 26, 2024

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[THE INVESTOR] Following the revision of the licensing system for low-cost carriers, the government said it will complete a review of license applications for new LCCs by the first quarter next year.

According to the Ministry of Land, Infrastructure and Transport, budget air carriers including Fly Gangwon, Air Premia and Aero K have submitted applications for business licenses. Other companies, including Air Daegu and Jeju Oreum Air, are expected to hand in applications this week.

Under the ministry’s reinforced entry criteria for LCCs, companies planning to carry out flight operations are required to have 30 billion won ($26 million) in capital and five airplanes to begin operations as budget carriers. The previous requirements were 15 billion won and three planes.

Currently, the country has six budget air carriers -- Jeju Air, Jin Air, Air Busan, Air Seoul, Eastar Jet and T’way Air. 

Air Premia

Industry insiders view that at least two budget air carriers will gain approval for operations next year.

For Fly Gangwon, Aero-K and Air Premia, this is their second attempt for an operation license.

“We are going to be the first air carrier to introduce premium economy seats. The global flight industry trend has been shifting towards offering PE seats for medium- and long-distance routes as customers seek an affordable but comfortable flight experience,” Air Premia said in a statement.

Air Philip, which currently has a 50-seat plane, plans to secure a license to fly a larger 180-seat plane.

Aero-K is also highly likely to secure a license, considering its Cheongju Airport-based flight routes will make it easier for passengers to travel around the South and North Chungcheong and Gyeonggi provinces.

According to government data, LCCs now make up 55.5 percent of the domestic flight market, up by 270 times compared to 13 years ago when the first domestic flight by T’way Air was launched in 2005.

By offering passengers diversified routes at low fares, the low-cost airlines have seen their earnings more than double in the first quarter this year.

In the January-March period, the combined operating profit of six low-cost carriers spiked 131 percent on-year to 186.1 billion won. Jeju Air was the top performer in the first quarter, with its sales jumping 29 percent on-year to 308.6 billion won and operating income shooting up 71 percent to 46.4 billion won.

Earlier this year, T’way debuted on the country’s main bourse Kospi to step up efforts to secure capital. Jeju Air and Jin Air listed their shares in 2015 and 2017, respectively.

By Kim Da-sol/The Korea Hearld (ddd@heraldcorp.com)