Budget Carriers Struggle to Compete Full Service Airlines | Be Korea-savvy

Budget Carriers Struggle to Compete Full Service Airlines


Airplanes at the Incheon International Airport in Incheon, just west of Seoul. (Yonhap)

Airplanes at the Incheon International Airport in Incheon, just west of Seoul. (Yonhap)

SEOUL, Feb. 24 (Korea Bizwire)The polarization of profits between full-service carriers (FSCs) and low-cost carriers (LCCs) is worsening as air travel demand has plunged in the aftermath of the coronavirus pandemic.

While LCCs are following in the footsteps of two FSCs — Korean Air Lines Co. and Asiana Airlines Inc. –  to fly more flights for cargo transport, their relative lack of experience and capability is expected to widen the profit gap.

Jin Air Co., the budget carrier unit of Korean Air, transformed a B777-200ER passenger jet into a cargo plane last year, before restoring it back to a passenger aircraft last week.

The move was driven by the need to reflect increasing demand for domestic flights. Also, improved cargo seat bags have allowed passenger aircraft to transport more cargo, Jin Air explained.

Lower-than-expected performance of cargo transport, too, seems to have impacted the company’s decision to restore the cargo jet.

Jin Air’s cargo transport accounted for only 4 percent of total sales for last year’s third quarter.

Jeju Air Co. and T’way Air Co. also jumped into the cargo business by transporting shipments on ‘passenger seats’, only to see their transport sales drop from the previous year.

Since passenger jets can ship only a limited range of items, LCCs can carry far less than FSCs.

In addition, a lack of a distribution network rising from the lack of experience in cargo transport is reining in LCCs from advancing in the transport industry.

“Shipments by air are carried out based on contracts that agree upon multiple flights, not just one,” said a source familiar with the industry. “There is no reason for shipping clients to terminate their contracts with FSCs only to sign new ones with LCCs.”

M. H. Lee (mhlee@koreabizwire.com)

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