Korea needs to decide on hub strategy and if to allow Finnair’s Busan flight

29 May, 2018

Korea is once again being forced to decide on its aviation hub strategy and if it should continue its unofficial policy of concentrating intercontinental flights at Seoul Incheon and not allow other Korean cities to have long-haul services.

Finnair is once again hoping to open a Helsinki-Busan non-stop flight. Busan is Korea’s second-largest city and only has short-haul regional flights. Finnair Korea GM Kim Dong-hwan told the Korea Times this month that Finnair is ready to open a new Helsinki-Busan flight by the end of the year.

Busan’s local government as well as Korea Airports Corporation, the manager of Busan Gimhae airport, are supporting the flight. For some time, they have wanted intercontinental flights to Busan. However, approval rests with Korea’s regulatory body, the Ministry of Land, Infrastructure and Transportation.

Busan and KAC have tried for a few years to mount intercontinental flights to Busan. But Korea sees Northeast Asian aviation at a critical juncture in which hubs – from Seoul to Tokyo to Beijing – are at competitive war. Intercontinental flights to Busan risk fragmenting Korean aviation, the argument goes. So, flights are being directed to Seoul Incheon.

It is difficult to separate hub strategy from protectionism. Foreign airlines like Finnair are more likely to mount intercontinental flights from Busan since they can use a hub outside Korea to connect to/from Busan. It is easier for local airlines to transfer passengers in Seoul.

The Korean market is growing. Finnair’s prospective Busan flight would not be at the expense of its existing Seoul Incheon flight. If Finnair is unable to grow in Busan, it may consider another Asian country instead of another flight to Seoul; so, Busan’s traffic cannot simply be re-directed to Seoul. Yet a Finnair Busan service may cause some passenger loss to Korean Air and Asiana. Korea’s two flagship airlines do not fly to Helsinki, but Finnair’s strategy is to use its hub to connect to dozens of European destinations, which is more online cities and with greater frequency than what Korean Air and Asiana offer.

Korea-Europe demand is expanding but Asiana and Korean Air are growing slower than they would like due to a shortage of Russia overflight rights. Finnair may present competition, but not dire.

If Finnair is able to finally launch a Busan service, it would be the first intercontinental flight for Busan and likely see other airlines – perhaps from the Middle East and North America – want to serve Busan soon. Many airlines have looked at Busan service but knew they would be unable to fly there.

Busan would be Finnair’s second destination in Korea. Finnair already serves primary cities in Japan and China as well as secondary cities. Even Japan’s second-largest city, Osaka, has few intercontinental links as airlines prefer passengers to travel to Tokyo. Finnair serves Japan’s Tokyo, Osaka, Nagoya and Fukuoka. Tokyo is still a strong aviation city despite what are only a handful of intercontinental flights from other cities.

There should be a constructive debate about Korea’s hub needs. It appears difficult to keep denying Busan service. But it should be asked if the debate is worthwhile or if hub strategy is only the excuse for protectionism – in which case, other arguments prevail.