Just returned from Seoul – did you know, it may not have the fastest average Internet speed in the world (fourth after Hong Kong, Japan and Romania – Latvia was fifth) but it does have the highest high broadband penetration (10mbps) in the world, followed by Japan, Hong Kong and Latvia in that order. (See Akamai’s quarterly report)

Well, when you’re there as a traveller, it’s pretty damn cool – you can find wifi on tap most places, and every person you meet in Seoul has a device or two, so you feel a sense of belonging to the same tribe even though you don’t speak the same language.

And so it’s always baffled me as to why the travel industry in Korea is still so traditional in its distribution when its consumers are so tech-savvy and clearly ahead of folks in other parts of Asia in how they live, work and play with the web.

But things are changing. One factor that will clearly drive change is low cost airlines – so here’s an interesting data point from the CAPA Low Cost & New Age Airlines Summit in Seoul last week (pictured below). While low cost airlines form 58% of air seats in South-east Asia, they only account for 9.2% in North Asia – so you can either say, “gee, so low” or “wow, so much room to grow”.

South Korea alone has five airlines playing in the space – puritans will say they are not the true low cost model ala AirAsia – but still that’s five more than they had a few years ago.

With Korean Air and Asiana Airlines, that makes seven airlines competing for the same market and that’s not counting other players like China’s Spring Airlines, whose international sector now accounts for 16% of its network and who says it has South Korea clearly on its radar, or Vietjet, the Vietnamese low cost carrier, which will begin flights from Hanoi to Seoul, its second international point after Bangkok.

Incheon Airport, which made a big splash at the event, is aiming to have 10 million low cost passengers in five years’ time and pundits are predicting that across South Korea, Japan, Hong Kong, Macau and Taiwan, low cost could well climb to 50% market share in about the same time – with Japan and South Korea leading the way. 

In Hong Kong, low cost airlines only form five to six percent of air seats compared with Singapore’s 35%. And in Korea, low cost airlines now form 50% of domestic passengers and 10% of international traffic.

Listening to the panel comprising four Korean airlines – Jeju Air, Jin Air, Eastarjet, t’way – it seemed that each was still not taking the plunge in terms of adopting a true low cost model, their reasons being Korean consumers were not ready to be charged for ancillaries, they still want full service and traditional tour operators were too strong for a direct distribution model.

Ken Choi, CEO of Jeju Air, which has 20% domestic share, said that while the airline has been profitable for the last three years, it hadn’t passed the critical stage yet – hence it is now focusing on the international sector, primarily China and Japan while its Guam and Bangkok flights were doing well.

And it was interesting to note that while the Korean airline chiefs said that the AirAsia model would not work for Korea and called for more regulation by authorities, Professor Tae Oum, who moderated the panel, said that governments were hampering their own carriers from competing with foreign carriers by pursuing protectionistic policies.

“For instance, the Malaysian government should have supported AirAsia instead of protecting Malaysia Airlines. Korea should learn this lesson – protection is only a way of delaying the inevitable. Air policies should not support eventual losers,” he said, adding that low cost airlines could be the key to unlocking Korea’s true potential as an outbound market.

In terms of distribution, JejuAir is managing to achieve 70% direct sales on domestic routes but only half that percentage on its international network – so still some ways to go and it’s caught in that age-old dilemma of how to break the stronghold of tour operators while pursuing direct distribution tactics. Mobile could be the game changer with the high smartphone penetration in Korea. Jeju Air’s director for planning, Hyuk Park, noted for instance that every smartphone user in the country is on Kakao – that’s 35 million subscribers – and this could be a new, alternative channel.

James Rhee, director of North Asia for AirAsia, believes you either commit to a true low cost model or not at all and likens it to the example of Dell when it started and wanted to sell direct. “Everyone said they couldn’t do it and they proved that they could.”

Of course, at some point, the disruptor can get disrupted as Dell has been and Rhee said, “You’ve got to keep evolving and adapting. AirAsia is at the top now, but what’s good today may not work tomorrow, so we have to keep changing the brand constantly.”

That the North Asia market is a different ballgame to South-east Asia is also evident from the breakup between AirAsia and All Nippon Airways. ANA, which now owns the rights to the AirAsia Japan name till October, is relaunching a new airline called Vanilla Air which will fly to resort destinations within Japan and APAC.

Rhee meanwhile said that AirAsia was “actively pursuing a re-entry into the market”. “In August and September, AirAsia Japan had one of the highest load factors in the AirAsia group of over 80% and we did see tremendous adoption by consumers. So we are very confident that if and when we come back, consumers will embrace us.”

Let the battles begin. Meanwhile, watch the low cost space because whatever segment of travel you are in, this is one phenomenon that will transform the North Asian market, the way it has in South-east Asia.