The airline is planned to start service with a few Korean Air Boeing 737s and operate domestic and short and medium range international routes. Eventually, Korean's routes will be split, with the low-cost carrier operating the shorter range routes while Korean Air 'proper' flies long-haul, international routes. Fares at the low-cost subsidiary will probably be about 30% less than Korean Air fares.
One of the reasons that spurred Korean to make this move is the planned completion of high-speed rail service throughout South Korea; the airline is, according to the statement, planning to "develop new markets and business models to effectively use the fleet [of Boeing 737s] that will be freed from domestic operations". Additionally, South Korea signed an open-skies agreement with neighboring China, Vietnam, Thailand and Cambodia, meaning that airlines from those nations and Korea can operate virtually unlimited flights between them. Korean Air also wants to get a larger share of the tourist market, and starting a low-cost branch will probably help them do this.Korean isn't alone, however - it must not only compete with established low-cost carriers Jeju Air and Hansung Airlines. Rival Asiana Airlines has said that it would not be launching a low-cost subsidiary - for the time being. The executives at Asiana will no doubt be watching Korean Air carefully to see how the 'low-cost experiment' goes.
