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12 23Fri09192014

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Guam top market for Korean LCCs

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GUAM is the top foreign market for Korea’s low-cost carriers, but the industry has yet to reach the full potential of this route, according to a report by an industry analyst group.

According to CAPA Center for Aviation, the Incheon-Guam route captured 53.2 percent of Korean LCCs' international market, followed by the Gimhae-Fukuoka at 52.5 percent, and the Gimhae-Osaka route 28.5 percent during the first quarter of 2013.

There’s more room for Korean LCCs to grow in this Pacific destination if more carriers enter the market, CAPA said

Jeju Air, Korean Air, and its Jin Air subsidiary currently serve the Guam route.

According to the Guam Visitors Bureau, the Korean market is becoming a strong second market for Guam, with this year’s arrivals representing a 45 percent increase during the first two quarters compared to the same period last year.

Of the 1.3 million visitors last year, 182,829 came from Korea, GVB said. The number represents a 59.4 percent increase from 2011.

“Added services from Korean Airlines and Jeju Air as well as increased charter flights help push us closer to 200,000 visitors,” GVB General Manager Karl Pangelinan said in June. “We are tracking to surpass this goal, and if reached it will be the highest number of arrivals from Korea in our history.”

Duopoly route

But according to CAPA, Korean LCCs can do better in the Guam route.

“Seoul-Guam is an example of Korean LCCs not meeting their potential,” CAPA said.

Although three low-cost carriers are currently serving Guam, CAPA noted that Korean Air and Jin Air are under the same company, “effectively making it a duopoly route.”

“Korean Air holds just under half of capacity while Jin Air and Jeju Air broadly split capacity, except during peak periods when Jeju Air ramps up capacity while Jin Air does not, likely in deference to its full-service parent. During peak periods, Jeju Air takes 28 percent of capacity while Jin Air only takes 17 percent,” CAPA said, citing Innovata data.

No movement

Unless more Korean LCCs enter Guam, CAPA said there is unlikely to be major movement in this market.

“There is a tidy arrangement with flag carrier Korean Air and Jin Air having access to Guam but not Saipan, a lesser beach market from Korea,” CAPA said.

“However, Asiana, Korea's smaller carrier, serves Saipan while Korean Air and Jin Air do not. Asiana's LCC subsidiary Air Busan does not serve Guam or Saipan.”

South Korea is home to five low-cost carriers: Asiana's partially-owned Air Busan, Korean Air's wholly-owned Jin Air, and independent LCCs Eastar Jet, Jeju Air, and t'way.

“In July 2013, the clear leader is Jeju Air, with nearly twice as much international capacity as the next largest LCC, Air Busan,” CAPA said.

Other foreign markets captured by Korean LCCs include Bangkok, Osaka, Fukuoka, Hong Kong and Cebu.

“Even though Cebu is as leisure-oriented as Guam, Asiana and Korean Air likely make more of an effort as Cebu is better known internationally than Guam,” CAPA said.

“This allows sixth freedom traffic whereas Guam is primarily a Korean and Japanese destination. There is very little cooperation between Air Busan/Jin Air and their respective parents Asiana/Korean Air. As noted above, the Korean share of the market will likely decrease as Filipino carriers make further inroads,” CAPA said.

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