Bangkok--27 Nov--Centre for Asia Pacific Aviation Korean Air (KAL) has moved quickly to address the threat of Tiger Airways’ planned JV in the South Korean market by announcing plans to launch its own LCC unit for international routes in May-08, subject to regulatory approvals. Investors welcomed KAL’s foray into the budget airline segment, sending the airline’s shares up 7% following the announcement. In Jun-07, KAL stated it would launch an LCC unit within three years as a display that it “shall no longer remain indifferent to invasion of LCCs from China and Southeast Asia into the Korean market”. KAL has brought forward these plans following Tiger Airways’ announcement earlier this month that it plans to establish a JV LCC airline with the Incheon City Government. Incheon Tiger Airways hopes to be operational by Aug-08, initially operating up to five A320s domestically. It later plans to expand its fleet to ten A320s as it targets international opportunities, subject to Government approval, in Japan, China, east Russia and Mongolia. KAL’s LCC unit, tentatively named Air Korea, will offer international services from a base at Incheon Airport to China (Shandong and Hainan provinces), Japan (except Tokyo), Thailand and Malaysia with three A300s and two B737s (with maintenance to be outsourced to KAL). A300s are not the typical choice for LCCs, with seating for around 266 passengers in a two-class configuration. Air Korea will have start-up capital of USD21.5 million (similar to Incheon Tiger Airways’ initial capital) and "gradually plans to add other short-or-mid-distance destinations”, according to a KAL statement. The carrier targets revenues of USD270 million in 2012. The Ministry of Construction and Transportation previously indicated it would award an international license for a budget airline unit of Korean Air if the carrier operates domestic routes first. Incheon Tiger Airways is expected to face the same restriction and operate domestic services prior to launching international operations. The Korean domestic air market has been in decline, following the launch of high-speed rail services connecting Seoul and Busan. Capacity has dropped by a quarter since 2003, as airlines refocus on more profitable international routes. The introduction of new entrants could exacerbate losses in the domestic market and participants will likely seek the rapid allocation of international rights, as domestic service opportunities are limited.