Korean Air's new low-cost carrier Air Korea to launch next year

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Korean Air is to next year launch a low-cost subsidiary carrier to be called Air Korea in a bid to challenge new competitors.

KAL announced earlier this year that it planned to launch a low-cost subsidiary sometime over the next three years and now says its board has approved plans to invest 20 billion won ($22 million) in the new airline.

Air Korea will be based at Seoul's Incheon International airport and it is expected to launch services in May 2008. Initial destinations will be in China, Japan, Thailand and Malaysia using three Airbus A300s and two Boeing 737s.

South Korea's market has been dominated by Asiana Airlines and KAL, but they are facing new competition at home from start-up carriers. New airlines will include Busan-based Yeongnam Air, which plans to launch early next year with Fokker 100s, and Singapore's Tiger Airways, which is setting up a joint-venture associate carrier in South Korea that plans to fly Airbus A320s from Incheon airport.

Another new South Korean carrier, Jeju Air, launched last year using turboprop aircraft, but has said it is seeking to add Boeing 737-800s.