Posted October 20, 2008 3:48 PM
By Eddy Pieniazek
Too Many Cooks Spoil the Broth
And another one bites the dust. Hansung Airlines, the South Korean carrier operating 4 ATR72s from Jeju to Seoul and Cheongju has effectively run out of funds and decided to suspend services, cancelling all flights on Saturday. Hansung reportedly owes the airports and its employees about a billion won, and debts were approaching 30 billion won (US$23 million) earlier this year.
Many factors have conspired and collaborated together to bring Hansung down (as they always do, it is rarely just the one event that cripples a business). A lack of fuel surcharges, providing over capacity in domestic markets in order to achieve the experience that regulators require before starting international service, and leasing costs in dollars (made all the more difficult by a weak local currency) are but three of the contributing factors.
But not to worry, the competition has hardly started.
We have Kostar Airlines (Fokker 100s between Seoul, Ulsan and Jeju), Eastar Jet (services from Seoul and Jeju with 737NGs) and Incheon-Tiger Airways (Five A320s from Incheon) scheduled to fill the gap and fly the crowded skies from 2009, not to mention Air Busan (Asiana offspring based in Busan with A330s?) which kicks off this month. Already up and running and competing with the heavyweights Korean Air and Asiana, are Jin Air (offspring of Korean Air with 737-800s and A300-600Rs), Yeongnam Air (based in Busan with Fokker 100s) and Jeju Air (737-800s and Dash 8Q-400s based in...Jeju).
With traffic stalling, that's probably enough, don't you think? Unfortunately, with load factors in the 40-50 percent for the newly operational carriers, the writing is already on the wall. There will be blood.
It does make you wonder however - do the brave business leaders behind these airlines appreciate that the market they are chasing today and into 2009, is likely to be far too small for all of them to survive?
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