Korean Air's budget carrier plans hit a snag
Authorities have introduced strict guidelines on the booming low-cost carrier business. -AFP
SEOUL - PLANS by Korean Air to launch a low-cost international airline in 2008, hit a snag on Wednesday as authorities introduced strict guidelines on the booming budget carrier business.
The announcement came just two days after South Korea's biggest carrier Korean Air said it would launch a separate, low-cost international airline in May 2008 and turn it into Asia's biggest budget carrier by 2012.
The planned new carrier, Air Korea, will initially operate short-haul international routes to China, Japan, Thailand and Malaysia, Korean Air said.
The transportation ministry made it clear that the new gudelines would require Air Korea to fulfil the two-year mandatory service at home.
'There is no exception in applying the new guidelines to the budget carriers, already operating or to operate in the future,' a ministry official handling air transport policy told reporters.
'Air Korea, as a separate unit, should abide by the rules.'
Now operating in South Korea are two low-cost domestic carriers. One, Jeju Air, has also announced plans to expand internationally.
Korean Air said it would set up Air Korea as a separate unit with three Airbus A-300s and two Boeing 737s on paid-up capital of 20 billion won (S$31 million).
Korean Air said it would concentrate on 'upper-class business travel demands,' with Air Korea focusing on travellers seeking shorter holiday trips.
Budget ticket prices would be set at between 75 per cent and 80 per cent of the parent company's prices, it said.
Discount carriers now make up 20 per cent of the US and European air travel market and are expanding quickly in China and South-east Asia. -- AFP
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