Invest1 publisher3 min readPublished
Korean budget carriers pile onto China routes four flights a week at a time
Parata Air starts flying Incheon-Shenzhen four times a week from Nov. 9, the newest of a run of China routes from Korean budget carriers. The seats are going into fast-rising Chinese demand, so the first fare fight is likelier on city pairs the carriers already share, such as Incheon-Qingdao.
The Investor · Invest desk
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What happened
- Seoul Economic Daily links the push to sharper competition at home after the Korean Air-Asiana merger and the launch of an integrated Jin Air.
- Parata will fly the Shenzhen route with a 260-seat A330-200 and plans a business-class cabin aimed at corporate travel.
- Jeju Air opened Busan-Guilin last month at four flights a week, taking it to 12 China routes.
- Eastar Jet starts Incheon-Xiamen on Oct. 28 and Busan-Hangzhou in December, bringing its new China routes to six.
- The Korea Tourism Organization counted 827,704 Chinese visitors in August, up 36.9% on a year earlier and 43.2% above August 2019.
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Why it matters
- exposure Jeju Air and Trinity Airways, the two budget carriers already sharing Incheon-Qingdao, would be first to absorb a fare cut on the corridor.
- contradiction The tourist boom behind the rush does not underwrite Parata's business cabin. That cabin depends on corporate travel to Huawei, Tencent, BYD and DJI country, a demand the national visitor count does not isolate.
- precedent Parata's April rights to Shanghai and Hangzhou from both Incheon and Yangyang make those two cities the next likely points of overlap with Jeju Air and Eastar Jet.
Four flights a week on a 260-seat aircraft comes to about 1,040 seats a week [1]. Against the Korea Tourism Organization's count it is small. Chinese visitors arrived at about 26,700 a day in August [2], so Parata Air's whole weekly Shenzhen schedule equals a little under 4% of one average day [3]. The count covers visitors from all of China, and Shenzhen is one city. Even so, August's year-on-year gain of roughly 223,000 Chinese visitors [4] would fill the route for about four years [5].
The new seats are going into demand that is still rising [13]. The Seoul Economic Daily report does not include fares or load factors, so on this evidence pricing pressure on the corridor is a forecast. The carriers are scheduling cautiously. Every new service in the report with a stated frequency, launched since September or due by December, runs three or four flights a week [8], including Jin Air's Incheon-Yichang from Oct. 12 [11]. The daily schedules belong to Trinity Airways, which has flown Incheon to Qingdao and Jinan every day since July [12].
Parata's order of launches points to where it expects a premium fare. Its first autumn launch goes to a corporate city that none of the other budget carriers in the report serves [10], with a business cabin on board [3]. The next service it is considering is three weekly flights from Yangyang to Shanghai, as early as December, according to industry officials cited by the paper [5]. If Parata also uses its Incheon-Shanghai rights [6], a Shanghai traveller would have budget flights to four Korean airports, with Jeju Air already on Busan-Pudong and weighing Daegu [9].
Demand may keep outrunning seats, in which case fares hold and the three- and four-a-week routes thicken toward Trinity's daily pattern. The shared pairs could instead crowd first, with fares giving on Incheon-Qingdao and then on Shanghai. The third possibility is that the surge is mostly holiday traffic around China's Oct. 1-7 National Day break [15], and the thin routes are the first to be cut.
I think the first case holds through the winter, with any fare fight confined to Qingdao and Shanghai. Chinese visitors were 32% of a record 15.05 million arrivals from January to August [14], about 4.8 million people [6], and that base was built before the holiday. In Dragon Trail International's survey last month, 20.1% of Chinese respondents planning foreign trips named Korea, with Japan third at 6.0% [16].
The counter-case sits in Parata's own pitch. The paper attributes the rush to Chinese tourists [15], while a business cabin to Shenzhen needs executives paying full fares in both directions [4]. The view is wrong if Jeju Air or Trinity cuts fares or frequencies on Incheon-Qingdao this winter [7] while Chinese arrivals are still growing.
What to watch
- Korea Tourism Organization arrival figures for September and October, the first test of whether Chinese demand holds after the Oct. 1-7 holiday.
- Whether Parata confirms the December Yangyang-Shanghai start and sets dates for its Incheon-Shanghai and Incheon-Hangzhou rights.
- Jeju Air's year-end decisions on Daegu-Shanghai, Jeju-Chengdu and Jeju-Chongqing.