Competition heating up for budget airlines

Ko Kyoung-tae, Competition heating up for budget airlines, Korean Herald, 2008.05.27

[The Origianl Article]
Local budget air carriers are fiercely vying to attract holidaymakers this summer in the buildup to Korea's first-ever low-cost international flights.

Jeju Air Co. and Hansung Airlines Co., both domestic budget airlines, are set to start international flight services to Japan in July.

They plan to service routes connecting smaller cities in Korea and Japan, which major air carriers have shunned so far.

Jeju Air plans to start flying between Jeju and Hiroshima in July, company officials said.
The company will launch chartered flight services on the Incheon-Kitakyushu route in the same month.

Hansung Airlines is considering launching flights between Cheongju and Japanese cities such as Fukuoka this summer.

The no-frills carriers plan to set ticket prices at 20 to 50 percent cheaper than regular commercial carriers.

The competition has prompted major airline companies to tap the low-cost market in recent months.

Largest market player Korean Air Lines Co. set up a new budget airline affiliate, Air Korea, last year, with plans to start servicing domestic routes in July.

The new carrier is also set to launch regional flights, including to China, Japan and Thailand, next year.

Other budget airlines are expected to tap the international flight market earlier than expected.
Market No. 2 Asiana Airlines Inc. also recently announced an investment in Busan International Air to move into the fast-growing budget airline industry.

Asiana said it would inject 23 billion won ($22 million) into the Busan-based low-cost carrier, aiming to launch in October.

[Summary and Opinion]

In Korea, we have begun to have local budget air carriers such as Hansung Airlines Co., and Jeju Air Co. These air carriers has been giving a domestic flight services. However, from this summer, both domestic budget airlines are set to start international flight services to Japan and China. They plan to service routes connecting smaller cities in Korea and Japan, which major air carriers have shunned so far.

Korean Airlines and Asiana Airlines Inc. are preparing to set a budget air carriers. KAL will set up its affiliate, and Asiana Airlines Inc. will invest in Busan International Air to move into the fast-growing budget airline industry. By this situation, travelers can have many choices, such as getting a low price ticket, and a better service, than before.

I want to analyze this situation through 4P, especially "PRICE". In the view of "PRICE". we have several views for example a cost-based pricing, competitor-based pricing, value-based pricing. I would like to analyze this article by using a competitor-based pricing.
In Korea, two major airlines share the market. Local budget air carriers need to consider a niche market to survive in the market. Also, local budget air carriers need to have price a competition

A competitor-based pricing is a strategy that involves pricing below, at, or above competitors' offering. In this case, the price will be below compared to the two major airlines' ticket prices. By this strategy, local budget air carriers can take an advantage position when competing with the majors air carriers. Travelers, especially backpackers, may consider of using local budget air carriers rather than major airlines cause of the cheap price.

20100062 Kim Dong Hoon(김동훈) entry#12