The Fair Trade Commission said Thursday it has decided to fine South Korea's two largest airliners Korean Air and Asiana Airlines a combined 11 billion won (US$9.7 million) for abusing their market dominance by blocking low-cost carriers from selling cheap tickets through travel agencies.
The FTC said it will order Korean Air to pay 10.4 billion won and the No. 2 Asiana Airlines 640 million won.
The FTC said the two airliners used provision of seats for popular flight routes during peak seasons as the means to pressure travel agents to buy their tickets for routes contested by low-budget carriers.
Due to such practices, budget airliners found it difficult to sell their cheap domestic tickets mainly bound for Jeju Island and international flight tickets bound for close destinations like Japan and Southeast Asia.
That damaged the fair chance of competition for the low-budget carriers, the FTC said.
Korea's small regional airlines including Jeju Air, Hansung Airlines and Yeongnam Air suffered from the two big airlines' unfair practices, it said. Hansung Airlines and Yeongnam Air stopped operations in 2008 due to sluggish ticket sales.
Korean Air intentionally excluded budget airliners from the market by offering conditional rebates under the name of "Volume Incentives" to 200 major local travel agencies, the FTC also said.
"For example, Korean Air gave 0.5 percent of the ticket sales to travel agencies if the proportion of Korean Air tickets exceeded 50 percent of the total ticket sales," said Ahn Young-ho, director general of the anti-monopoliy bureau of the FTC, in a press briefing.
"A restricted market entrance of budget carriers leads to a reduced consumer benefit, as budget carriers offer tickets that are cheaper by 20-30 percent than the dominant airliners," he said.
Currently, while Korean Air and Asiana Airlines charge 84,400 won per person for the Gimpo-Jeju weekend run, Jeju Air offers 67,600 won.
The two big airliners' practices also breached travel agencies' rights to choose a carrier in making their travel package portfolios and took away opportunities to lower costs, the watchdog said.
