LCC Struggles with Prolonged COVID-19 Impact... Desperate Cost-Cutting Efforts

On the 29th, passengers heading to the United States are completing their boarding procedures at Terminal 1 departure hall of Incheon International Airport. Photo by Moon Honam munonam@

[Asia Economy Reporter Dongwoo Lee] The domestic low-cost carrier (LCC) industry is strengthening austerity management, including fleet reduction, due to the prolonged impact of COVID-19.

According to the industry on the 23rd, the four major LCCs?Jeju Air, Jin Air, T'way Air, and Air Busan?recorded a total operating loss of 237.9 billion KRW in the first quarter of this year.

Jeju Air posted an operating loss of 87.3 billion KRW in Q1, a 33% increase compared to the same period last year. Jin Air recorded 60.1 billion KRW, T'way Air 45.4 billion KRW, and Air Busan 47.2 billion KRW in operating losses. Jeju Air, Jin Air, and Air Busan are currently in a state of capital erosion.

The industry is focusing on securing capital while intensifying cost-cutting efforts. Jeju Air and Jin Air terminated lease contracts for two and three B737-800 aircraft respectively this year.

In particular, while the full-service carrier (FSC) Korean Air offsets sluggish passenger revenue with cargo sales, LCCs find it difficult to secure competitiveness in cargo transportation systems, deepening the polarization within the aviation industry.

Jin Air operates B777-200ER passenger aircraft converted into cargo-only planes by removing seats, but cargo revenue accounted for only 5% of total revenue in Q1 this year.

With the suspension of international flights, the total number of flights dropped nearly by half from 19,000 in Q1 2019 to 7,400 in Q1 this year, causing a sharp decline in cargo transportation volume as well.

This content was produced with the assistance of AI translation services.