Competitive Low-cost Carriers
Korean low-cost carriers (LCCs) have been launching their services to Vladivostok in Russia one after another since last year, further intensifying competition in the sky.
Russia's Vladivostok is emerging as the fiercest battleground for Korean airliners. Flights to Vladivostok from Korea became monopolized by Korean Air due to Asiana Airlines’s suspension of the service two years ago. However, since last year, low-cost carriers (LCCs) have been launching their services to the far eastern Russian city one after another, further intensifying competition in the sky.
According to the air transportation industry on May 31, Air Busan began to consider launching irregular flights to Vladivostok. The airliner is in a kind of testing process to forecast occupancy rates and set proper ticket prices prior to launching a regular service. It is said that Air Busan plans to operate two flights a week during the high season of July to August. The departure area is not limited to Busan, but can be Gimpo near Seoul among others. If the irregular flights produce positive results, they are highly likely to turn into regular flights in the second half of this year.
Eastar Jet will launch a third Vladivostok route in June after one by Jeju Air in September of last year and another one by T’way Air in April of this year. If Air Busan follow suit, four LCCs will offer flights to the city and including Korean Airline which already advanced to Vladivostok a long time ago, a total of five airliners will compete in the route.
Korean Air has been operating its Vladivostok route as a Korean national flag carrier for 24 years since its first flight to Vladivostok in June 1994. Asiana Airlines suspended its flight to Vladivostok in February 2016 after four years of service while restructuring routes due to the normalization of its business. This has barred Air Seoul, a subsidiary of Asiana Airlines, from joining the competition to fly to Vladivostok.
Vladivostok, which is a two- to three-hour flight away from South Korea, is a new tourist market where Western and Eastern culture are in harmony with demand for flights among Korean passengers has been on the rise since last year.
Concerns are being raised over excessive competition as the number of Korean airliners that fly to Vladivostok increased to five from one in less than a year. The actual occupancy rate of Korean Air's Incheon-Vladivostok route has been trending downward. The average occupancy rate of flights from Vladivostok to Incheon dropped by 11 percentage points to 67 percent at the end of April of this year from 78 percent last year. Over the same period, that of flights from Incheon to Vladivostok also dropped from 77% to 75%.
On the other hand, the occupancy rate of Jeju Air, which has been in service for nine months, is on the uptick. Its occupancy rate rose 10 percentage points from mid-70 % in January to mid-80% in the February to May period. Lower ticket prices greatly contributed to the increase. Although Jeju Air is offering the regular one-way fare for its Vladivostok route at 385,000 won, the fare can reach as low as 170,000 won.
Some special deals include a 200,000 won (US$180) Korean Air ticket to Vladivostok from Incheon even though its price is 430,000 won (US$387). The lowest ticket price is expected to fall lower when both Eastar Jet and Air Busan join the competition on a full scale.
"While demand for flights to Vladivostok is growing, the route will not be lucrative when four or five airlines compete for the route at the same time," said an official in the aviation industry. "The second half of this year when LCCs launch new services to Vladivostok will be a watershed in the price war.”