Introduction

This August the Korean Ministry of Transportation accepted the request of its national airline to reject Tiger Airways’ establishment in Korea, in a spirit of protectionism and nationalism. This request aimed at protecting local airlines from competition and lower fares, using as an argument technical terms from bilateral agreements currently rejected and characterized by IATA as “archaic” and nationalistic. It is ironic that in the past Korea pursued liberal access for its carriers to the other countries and now rejects such a move from another country afraid that using the “Korean carrier” label, Tiger attempts to penetrate in the Northeast Asian market. Korea needs to act for airline liberisation in order to avoid the negative impacts and adjust to the world of future.

Original article: “Korea steps back into the dark – Airline protectionism flourishes in Seoul” on Thursday, 28 August 2008, report by Centre for Asia Pacific Aviation, published by Vicky Karantzavelou, TravelDailyNews.com.

Essay by Daisy Modiano
Master in Tourism Destination Management student 2008/2009

In a world of liberisation with constant focus on the future and its challenges, Korea’s rejection of Tiger Airways’ entrance in its market seems like an act from the past. With their request the opponents of Tiger Airways’ establishment in Korea, tried to protect their national airlines from competition and thus lowering their fares. Is this really the way to remain strong? Trying to protect the national carriers, its “flag” and the relevant interests of course, did the Korean authorities only postpone something that is inevitable to happen in the future if they want to survive?

As mentioned in the article: “Applications of liberisation and deregulation in air transport”, in “Tourism Management Dynamics”, by Buhalis and Costa, until thirty years ago the regulatory regime in the air transport, based on international restrictive agreements, protected the national (usually state-owned) carriers from external competition, as they were regarded as promoters of economic modernization and regional development, providing stable transport services and supporting the country’s international recognition bearing its flag. However, in practice this protective regulatory regime led to inefficient carriers offering low quality services at irrationally high prices, and dissatisfied customers (Papatheodorou, 2002). In the past 30 years consequently there has been a motivation and action towards deregulation in order for the market to become free, with competition and no boundaries.

By closing the door to Tiger Airways, thus preventing the other countries’ carriers to approach as well, Korea may have temporarily protected its airlines from competition, and its national pride but it does not seem that it has also protected its long term interests by doing so. Would Tiger Airways, a low cost carrier be a true competitor or would it support traffic growth and economy, creating more opportunities? With this strict application of nationalism, it is holding back from the liberal global evolution where airlines are able to compete freely in a consumer-oriented market.

Korea’s decision could also create a problem with the expansion of airline liberisation in the whole region. The Center of Asia Pacific Aviation estimates that if the three North Asian markets of Korea, China and Japan are fully opened with free airline competition, there is potential for more than 300 million additional tourist trips every year. Consequently there are great positive impacts for tourism development in the area, tightening cultural ties amongst these countries, creating large employment opportunities and new opportunities for the regions and their airports. Passengers select airlines considering fares and quality of services, as well as frequency and connection of flights, so competition leads to lowering the fares for example but also to massive growth of passenger numbers, thus visitation and expansion of economic activity in the destination when it opens its own market and moves freely within the general market.

As Giovanni Bisignani, IATA’s CEO and Gen.Director, mentioned in Korea’s case: “who cares who owns an airline so long as it is safe and provides efficient service? It’s time to move from the world of flags and politics to brands and business”. That is apparently the way to compete in the current international situation, business oriented and not completely driven by pride and nationalism.