Korea Low-Cost Airlines Post Losses as Weak Won and High Fuel Costs Bite

[Photo=T'way Air]

Despite a rebound in passenger demand, South Korea’s low-cost carriers posted a string of losses as a weak won and high oil prices drove up costs, the industry said. Intensifying competition — often described as a “chicken game” — further squeezed margins.

Carriers say they will prioritize tighter, efficiency-focused management this year to improve profitability.

According to the industry on Feb. 27, T'way Air posted 1.7981 trillion won ($) in revenue last year and an operating loss of 265.4 billion won. Revenue rose 17% from a year earlier to a record high, but the operating loss more than doubled.

Other listed low-cost carriers also reported weak results. Jeju Air, the sector leader, was the only listed carrier to post an operating profit in the fourth quarter, but it still recorded an annual operating loss of 110.9 billion won, swinging to a loss. Jin Air and Air Busan also turned to losses, posting operating losses of 16.2 billion won and 4.5 billion won, respectively.

The main drivers were the strong dollar and high oil prices. With aircraft lease payments, fuel and maintenance largely settled in U.S. dollars, a higher won-dollar exchange rate directly increases costs. Fuel expenses also rose as global oil-price volatility persisted.

T'way Air said profitability deteriorated due to higher investment costs tied to introducing larger aircraft, rising costs from the exchange rate and oil prices, and tougher competition as capacity increased.

Competition has also weighed on earnings. As carriers rapidly expanded capacity on routes to Japan and Southeast Asia, fare increases have been limited while price competition to attract passengers has dragged on. A Jin Air official said stagnant domestic travel demand, the weak won and increased LCC supply also hurt profitability.

Carriers outlined plans centered on financial discipline. Jeju Air said it will avoid a major expansion in scale while introducing seven next-generation aircraft and reducing older planes, and will manage liquidity and financial ratios through asset sales.

Jin Air said it will maximize earnings by adjusting capacity based on route-by-route demand and profitability analysis, while strengthening cost competitiveness through steps including introducing more fuel-efficient aircraft. Air Busan said it will focus on a flexible route strategy and more efficient fleet operations to support a mid- to long-term recovery and competitiveness.

T'way Air said it plans to create a turning point through new aircraft, expanded passenger and cargo supply, stabilizing mid- and long-haul routes, and adding new routes from regional airports.

An industry official said the number of people entering and leaving South Korea hit a record high last year, but LCC earnings and financial conditions were significantly damaged. If the current operating environment persists, the official said, some carriers could face restructuring. The official added that in 2027, the Korean Air-Asiana Airlines merger and the integration of three LCCs — Jin Air, Air Busan and Air Seoul — could ease oversupply to some extent.

* This article has been translated by AI.

Lee Seongjin leesj@ajunews.com