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Korean Air Lines Co.'s budget unit will start flights in May 2008 as the nation's largest airline fights off competition from Tiger Airways Pte. and Jeju Air Co.
Air Korea, as the unit is tentatively called, will fly to China, Japan, Thailand and Malaysia, Seoul-based Korean Air said in an e-mailed statement today. Korean Air will invest 20 billion won ($21.5 million) to set up the budget carrier, which will start operations with five planes.
The Korean Air unit will challenge Jeju Air and Tiger Air, as economic growth boosts travel demand in South Korea and across Asia. International passenger traffic rose 7.6 percent in the Asia-Pacific region in the first nine months of the year, according to the International Air Transport Association.
``It's the right strategy for Korean Air to block possible competitors and to take the lead in the budget carrier market,'' said Seo Jin Hee, an analyst at SK Securities Co. ``Inroads by international budget carriers will be unavoidable,'' added Seo, who has a ``buy'' rating on Korean Air.
Air Korea will begin operations with three Airbus SAS A300s and two Boeing Co. 737s, Korean Air said.
Korean Air rose 5.9 percent to 68,700 won at 10:16 a.m. in Seoul compared with the benchmark Kospi index's 2.5 percent gain.
Tiger Airways, the budget airline unit of Singapore Airlines Ltd., said on Nov. 5 that it will set up an airline in South Korea in partnership with the Incheon city government.
Jeju Air, South Korea's biggest low-cost carrier, said earlier this month that it will add 15 Boeing 737-800 aircraft by 2013 to begin overseas flights and boost capacity. Hansung Airlines, based in Cheongju city, South Korea, began flying in August 2005."
[url=http://www.bloomberg.com/apps/news?pid=20601080&sid=aBZI.6b79vKo&refer=asia]Link[/url]
East Asia is finally getting on the LCC map! Just a few months ago there were no international budget flights serving this region, and not much sign of any coming soon. In just a short space of time Cebu Pacific have started flights to Shanghai, Viva Macau have launched flights to Busan, and will start serving the Tokyo route in a few weeks. Now we have 2 new Korean based international LCCs planned for 08, and one of the existing domestic LCCs intending to start overseas flights too.
