Government grants business license to 3 new LCCs

Photo of Air Premia Boeing 787-9 Courtesy of Air Premia

By Kim Hyun-bin

The Ministry of Land, Infrastructure and Transport has granted business licenses to three new low-cost carriers (LCCs― Fly Gangwon, Air Premia and Aero K.

Industry experts believe the move will inevitably escalate competition in the already saturated air travel market here.

The government decided to issue the licenses by evaluating the companies' financial ability to operate a sustainable business, possible new routes, airport capacity, safety measures and consumer benefits.

Of the five contenders, only Air Philip and Guardian Airlines didn't meet requirements for license issuance, according to the ministry.

The main criteria included: minimum 15 billion won ($13.3 million) in capital, required number of pilots, flight attendants and maintenance personnel, and a fully functional service manual.

The ministry says it also held an industry analysis to see if the new additions could have a negative impact on existing airlines and the market.

The three new carriers must apply for an air operator certificate (AOC) within a year and commence flight service within two years. Those failing to meet the deadline will face license cancellation.

Also, for the three years from launch of service, the airlines must operate via the airports stated on their license applications.

In the applications, base airports were indicated by airline: Fly Gangwon is to be based at Yangyang International Airport in Gangwon Province, while Aero K is at Cheongju International Airport in North Chungcheong Province, and Air Premia is in Incheon International Airport.

“We have made the strict rule that all the approved airlines need to fly out of their base airports to reinvigorate regional economies,” Jin Hyun-hwan, director general for aviation policy at the ministry, said during a briefing at the Seoul Government Complex, Tuesday.

The government will also regularly inspect the airlines' finances and see if they are in compliance with safety standards.

The country already has two full-service carriers ― Korean Air and Asiana Airlines ― as well as six LCCs ― Jeju Air, Jin Air, Air Busan, T'way Air, Eastar Jet and Air Seoul ― which have a market share of over 55 percent, according to government data.

The new bids are not welcomed by the currently operating airlines, who claim new entries will create excessive competition in an already saturated market.

“It was unexpected that the government would approve licenses to three new LCCs, when some existing airlines are having difficulty staying afloat. All the LCCs should be worried about the competition which could force some of the airlines to close down in the future,” an official from a local carrier said.