Introducing Cargo Aircraft and Expanding Medium- to Long-Haul Routes... LCCs Flapping Wings for Survival

T'way Air, Air Premia... Expansion of Medium- to Long-Haul Routes
"Efforts to Diversify Business for Performance Recovery"

[Asia Economy Reporter Yoo Hyun-seok] Low-cost carriers (LCCs) are engaging in survival competition by introducing cargo-only aircraft and expanding medium- to long-haul routes. This is a desperate effort to recover from the deteriorated performance caused by COVID-19.

According to the aviation industry on the 2nd, T'way Air will launch a new Incheon~Sydney route operating four times a week starting from the 23rd of next month. It is the first among LCCs.

Until now, only Korean Air and Asiana Airlines operated the Sydney route. In particular, T'way Air has focused on expanding medium- to long-haul routes to strengthen profitability. To this end, it introduced three large aircraft, A330-300s with 347 seats, in the first half of the year. Since May, it has also started operating the Singapore route.

It is not only T'way Air. Air Premia has been operating the Incheon~Los Angeles (LA) route five times a week since the 31st of last month. This is also the first time a Korean airline has operated the LA route since 1991. After launching the Incheon~Singapore route in June, Air Premia expanded its routes last month to include Vietnam.

Not only medium- to long-haul routes but also airlines diversifying their businesses are increasing. Jeju Air introduced cargo aircraft for the first time among LCCs in June. Starting with the Incheon~Hanoi route in June, it expanded cargo routes to Japan in July and China in August. The volume of cargo transportation has also steadily increased, recording 242 tons in June, 920 tons in July, 952 tons in August, and 1,060 tons in September. Additionally, Jin Air signed an air cargo transportation contract with Hanjin. Since last month, Hanjin has started transporting cargo to seven airports in five Asian countries?Thailand, Japan, the Philippines, Malaysia, and Vietnam?through Jin Air.

The expansion of LCC businesses is interpreted as a move to improve the deteriorated performance caused by COVID-19. Jeju Air recorded an operating loss of 32.9 billion KRW in 2019, followed by operating losses of 335.8 billion KRW in 2020 and 317.2 billion KRW in 2021. T'way's operating loss increased from 19.2 billion KRW in 2019 to 148.3 billion KRW in 2021, and Jin Air's deficit also widened from 48.8 billion KRW to 185.2 billion KRW during the same period. As a result, some airlines conducted paid-in capital increases to improve their deteriorated financial structures.

Especially this year, although the skies to overseas destinations have opened due to the easing of COVID-19 quarantine measures in various countries, deficits continue due to increased burdens such as high exchange rates. Jeju Air, T'way, and Jin Air recorded operating losses of 134.6 billion KRW, 68.4 billion KRW, and 61.4 billion KRW respectively in the first half of the year.

However, whether the business diversification of LCCs will succeed remains uncertain. Since medium- to long-haul routes are new business areas, some time must pass to evaluate their outcomes. Professor Hwang Yong-sik of Sejong University said, "The new businesses of LCCs can be seen as being in an experimental stage right now. However, since there are not many precedents for such businesses, if they succeed in about one to two years, they could establish a completely new revenue model."

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