(K-LCC Introduction) 71. LCC Changing the World ② – Star News – Star News VRESP




Reporter Chaejun | 2024.05.15 14:24

/Photo provided by pixabay

The biggest change since the introduction of K-LCC was the cessation of airfare increases on the Jeju route, which had been repeated as an annual event.

According to an analysis of Jeju Island in 2009, Korean Air and Asiana Airlines, which divided the domestic aviation industry, raised fares five times in 10 years, but refrained from raising fares around the launch of K-LCC.

In 1997, before the introduction of K-LCC, the fare for the Gimpo-Jeju route (based on peak season) was 49,600 won, but it was sequentially increased to 59,100 won in 1998, 72,500 won in 1999, and 79,000 won in 2001. In 2004, it rose to 92,900 won. The rate was raised every two years under the pretext of an increase in international oil prices, nearly doubling in just seven years.

However, since 2006, existing airlines have refrained from raising fares for several years. Starting in July 2008, only a fuel surcharge levied in stages when aviation fuel prices were increased was introduced. Existing airlines have expanded their discounts as they compete with K-LCCs in rates. Asiana Airlines offered discounts of up to 20% on routes from Jeju to Gimpo, Daegu, and Cheongju in October 2009, while Korean Air offered discounts of 5-15%.

Then, K-LCCs used a more drastic discount policy to widen the gap in fares with existing airlines. In October 2009, Jeju Air discounted fares for routes from Jeju branch to Gimpo, Cheongju, and Busan by up to 40%, while Jin Air and Air Busan discounted fares for Gimpo-Jeju and Busan-Jeju routes by up to 50%, respectively.

/Photo provided by Jeju Air

The spread of K-LCC has led to price destruction in the airline industry, creating a world never seen before. The 10,000 won discount event held by T’way Air in December 2010 ended with a literal ‘big hit’. As a result of targeting 10% of all seats from December 8 to 31, 7,500 seats were sold out with a 100% reservation rate.

Also, on January 12, 2011, consumers had to work hard to book ‘10,000 won’ airline tickets on Jeju Air after lunch. Due to the overwhelming number of users, people couldn’t even access the website, let alone make a reservation. They just gave up on making reservations because they were hungry. Consumers were enthusiastic about the false event of a 10,000 won plane ticket from Gimpo to Jeju. It was impossible to travel from Seoul to Jeju for 20,000 won using any other means of transportation.

From K-LCC’s perspective, it is an event with obvious negative margins, but if you know it, it is not a business that is that low. As a result of Jeju Air’s boarding trend statistics from 2006 to 2010 after its launch, it was found that the week before Lunar New Year was the most off-season of the year. The intention was to reduce the loss by selling it for 10,000 won rather than operating an empty plane and incurring a loss. Coincidentally, this was the period of the founding anniversary, so it also served as a justification for repaying customer support. Jeju Air explained, “This is a combination of customers who were reluctant to use airplanes because they thought ticket prices were expensive and the airline’s strategic promotions that took profitability into consideration.”

Just five years after the launch of K-LCC, a never-before-seen world of ‘air ticket price destruction’ opened up in our society. Therefore, it has emerged as a wise idea to reserve airline tickets in advance for flights to be boarded 3 to 4 months in advance. Although it has become common now, in 2010, when K-LCC was 5 to 6 years old, consumers were busy learning the concept of the so-called ‘early bird’.

The supply of air tickets for K-LCCs is limited, so by the time tickets run out, the fares have reached the normal price. The higher the reservation rate, the more expensive the price was. Usually, when the reservation rate is less than 10%, it is available at the lowest early bird price. Due to this collapse in airline ticket prices, the perception of travelers has also changed significantly. Once your travel itinerary is confirmed, it is best to make a reservation as soon as possible. Airline tickets with more restrictions, such as no schedule changes or cancellations, were sold cheaper and faster.

– Seongjin Yang, aviation industry critic

/Photo provided by Jeju Air

About Michael Steven

I am a news writer, editor and journalist with more than 13 years of experience. I have an MA in Journalism and have published work in various publications around the world. With me, you don't have to worry about copyright and defamation issues or being punished by search engines. You get original work that complies with media laws. Communication: I really prioritize good communication with clients, from their expectations to the initial plan and vision of the project in particular. Tell me what you want - even down to the level of 'how' you want it written. Nonetheless, I must note that self-expression is very important to me and I hope to reach a solution together with the client but not at the expense of the quality of the finished product.

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