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Thu, August 11, 2022 | 17:08
Business
Are Budget Airlines Gambling on Safety?
Posted : 2009-02-24 18:38
Updated : 2009-02-24 18:38
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By Kim Tong-hyung
Staff Reporter

Budget airlines are looking to exploit the economic crisis, but it remains to be seen whether they end up paying for the fierce price competition, which some industry watchers call overaggressive.

Leading the bargain binge is Jin Air, an affiliate of Korean Air, the country's flagship carrier, which touts that it provides cheaper travel from Seoul to Busan than the KTX high-speed trains.

Jin Air is charging 50,000 won per seat for the route between Kimpo International Airport and Busan on weekdays, but offers a 20-percent discount on weekends and also gives passengers a 10,000-won discount coupon.

Even when considering the 4,400 won in fuel surcharge and 4,000 won in airport tax, it is still a cheaper trip than the 47,900 rides on KTX, Jin Air officials said.

Eastar Jet, a new low-cost carrier that debuted last month, is also making a splash with lavish discounts. The airline is providing eight flights from Kimpo Airport to Jeju Island per day, and the first 10 percent of the passengers to book their tickets for a flight get to pay only 19,900 won for their seats, compared to the normal price of 57,900 won.

The next 20 percent of passengers pay 29,900 won each for their tickets.

The country's other two budget airlines ― Jeju Air and Air Busan ― aren't as aggressive in throwing out discount products.

However, Jeju Air, an Aekyung Group unit, which is looking to expand the sales of its international routes, is offering 50 percent discounts for Kimpo-Jeju tickets to customers who had used its flights to Osaka and Kitakyushu.

Air Busan, jointly owned by Asiana Airlines and the Busan Metropolitan Government, is also offering 25-percent discounts for passengers who book the tickets on their Web sites.

``The bad economy has consumers reacting more sensitively to ticket prices, and we are looking for inexpensive solutions and more ways to save costs to provide more affordable products,'' said an official from Eastar Jet.

Budget airlines are hoping that the current economic slowdown opens new opportunities for their business, with their no-frills, low-cost approach hitting a chord with beaten-down consumers.

The industry certainly needs a break ― the country had six low-cost carriers at the start of 2008, but that number was reduced to three by the end of the year, with only the airlines affiliated with large enterprises surviving, although the January debut of Eastar Jet added a fourth competitor.

Although the companies' desperation to expand its customer pool is understandable, industry watchers wonder whether the airlines are shooting themselves in the foot with their opportunistic gamble on air fares.

Budget airlines aren't immune from the usual risks in the industry, such as fuel costs and economic conditions, and it's questionable whether an aggressive price competition over domestic flights and short-haul routes would be a reasonable strategy when the margins weren't that great to start with.

thkim@koreatimes.co.kr
 
LG
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