Air Busan, a fast-growing Korean budget airline company that prides itself on providing low airfares and

differentiated services to customers, has entered the Japanese market. The company anticipates growth in

the number of tourists visiting Japan and Korea.

Korean low-cost carrier (LCC) Air Busan began to service the routes between Busan and Fukuoka and

between Busan and Osaka in March 2010 and April 2010, respectively. At the same time, the airline

company established branch offices in Japan. It is expected that the new routes will encourage more

Korean tourists to visit Japan.

Air Busan was established in August 2007 as a joint venture between the City of Busan and 14 local

companies. Its headquarters is located in Busan Jin-Gu, Korea. The company was originally named Busan

International Airlines Co., Ltd. and was later renamed to the present name in February 2008 when it

received a capital injection from the Asiana Airline group and became a member of the group.

Using Gimhae International Airport as its hub, Air Busan operates daily domestic flights to and from Gimpo

Airport in Seoul, and Jeju Airport in Jeju Island.

Rising on the back of cost reduction efforts and unique sales strategies

Air Busan’s strengths lie in its low airfares and unique, route-specific marketing strategies. Its most

competitive offering, a round-trip between Fukuoka and Busan costs only around 14,000 yen with airfare

and related charges included. What makes such low pricing possible is the company’s low-cost policy. By

focusing on selling tickets over the Internet, the airline saves the cost of commissions to travel agencies.

At Air Busan, over 60% of the tickets are sold online, in contrast to an average 25% at major air carriers,

said Bae, general manager of Air Busan’s Management and Support Team.

Hyung Gil Bae, General Manager of Management and Support Team

Their cost reduction efforts are not limited to ticket sales. Air Busan has also streamlined the organization

with a combination of outsourcing and efficient personnel allocation. The company has started sharing

resources, like airplane parts and components, with parent company Asiana Airlines.
Another unique feature of Air Busan is their adoption of different marketing strategies for each service

route. For example, the company offers special corporate customer services on flights to and from Gimpo,

because most of the passengers are flying for business purposes. By signing up for the corporate

program, a business customer can save up to 25% on airfare. This program is convenient for frequent

business travelers, who can enjoy greater discounts on air tickets by flying more often with Air Busan.

The company offers these original programs primarily because "major carriers can arm themselves with

mileage programs but operating a mileage program is too burdensome for Air Busan," said Bae.

In recognition of their distinct services, Air Busan won the Best Service Innovation Award in the 2009

Korea Customer Satisfaction Management Award from the Korea Management Association (KMA) in

2009.

Entering into the Japanese market was "natural evolution"

The carrier's hub city, Busan, is located close to Fukuoka. "Most Koreans would first think of Japan as a

possible overseas trip destination," and thus Air Busan's decision to launch flight services to Japan was a

natural evolution of its business, said Bae. Fukuoka was selected as the first destination in Japan because

"Fukuoka and Busan are working to form an economic zone, and have already built a close trade

relationship. Approximately one million people travel between the two cities by ship each year. So Fukuoka

was our first choice." For people in southern Korea, flying to Japan directly from Busan is geographically

closer and more convenient than flying from Gimpo or the Korean hub airport, Inchon.

In March 2010, Air Busan started its service between Busan and Fukuoka. The following April, the

company also launched a service between Busan and Osaka, where many Korean reside. In addition to

the current regular flights to and from the two Japanese cities (twice a day on both routes), charter flights

between Busan and Narita began in July for a limited time. The company will also start to work to attract

more corporate customers in Japan. Both of which will help contribute to an increasing number of visitors

to and from Japan and Korea.

Support by JETRO

Air Busan Co., Ltd. (Korea) established branch offices in Fukuoka and Osaka Airports. To set up Japan

offices, they utilized the JETRO Invest Japan Business Support Center (IBSC), receiving consultations

with expert advisors on a wide-range of business matters, including corporate registration and media

relations. JETRO also facilitated meetings with business partner candidates.

(August, 2010)