All Four LCCs Face a 'Dark Q2'... Low Expectations for Peak Season

The Deficit Has Increased 2 to 3 Times While Sales Have Decreased by Over 80%

Kim I-bae of Jeju Air, Han Tae-geun of Air Busan, Jo Gyu-young of Air Seoul, Choi Jong-gu of Eastar Jet, Choi Jeong-ho of Jin Air, and Jung Hong-geun of T'way Air, presidents of low-cost carriers (LCCs), are waiting on the 22nd to meet with Song Ok-joo, Chairperson of the National Assembly Environment and Labor Committee. The LCC presidents requested an extension of the employment retention subsidy. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Yoo Je-hoon] Due to the aftermath of the novel coronavirus infection (COVID-19), low-cost carriers (LCCs) all posted losses in the second quarter. In particular, sales revenue also decreased by more than 80% due to the suspension of international flights caused by COVID-19.

According to the aviation industry on the 15th, all four listed LCCs increased their losses in the second quarter. Jeju Air, the industry leader, recorded sales of 36 billion KRW and an operating loss of 85.4 billion KRW in the second quarter. Sales decreased by 88.5% compared to the previous year, and the deficit tripled.

T'way Air also recorded sales of 24.7 billion KRW and an operating loss of 48.5 billion KRW, showing negative growth. Sales dropped by 86.4%, and operating losses increased by 1.9 times. Although the scale of losses was relatively the smallest among LCCs, it was not free from the fallout of COVID-19.

Jin Air posted sales of 23.2 billion KRW and an operating loss of 59.6 billion KRW, while Air Busan recorded sales of 23.7 billion KRW and an operating loss of 51.4 billion KRW. These also represent an 84-89% decrease in sales and nearly double the operating losses compared to the previous year.

The reason LCCs received the worst performance report is that both international and domestic flights decreased due to COVID-19. Due to the nature of the LCC business model, poor performance in the passenger sector inevitably leads to increased losses. This contrasts with full-service carriers in a similar situation, which achieved a surprising turnaround to profit in the second quarter thanks to rising cargo rates.

The industry expects no dramatic turnaround in the third quarter results either. As of July, domestic flights have recovered to 99% and passenger numbers to 91%, but the suspension of international flights has led to cutthroat competition on domestic routes, which does not significantly help profitability improvement. An industry insider said, "Domestic flights are maintained more for business continuity and liquidity securing rather than profitability," adding, "It is highly likely that these will decrease again around next month when the peak season ends."

For this reason, each company has recently been focusing on securing liquidity in preparation for the prolonged COVID-19 situation. Jeju Air is pushing for a capital increase of 150 billion KRW, and Jin Air is pursuing a paid-in capital increase of 109.2 billion KRW. T'way Air recently failed a 64 billion KRW capital increase but is also exploring other financing methods.