LCC Industry Continues First Quarter Losses... Sweating Over Self-Help Measures Amid Worsening Financial Structure

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 Mun Ho-nam munonam@

[Asia Economy Reporter Dongwoo Lee] The domestic low-cost carrier (LCC) industry is expected to continue operating losses in the first quarter of this year following last year due to the prolonged impact of COVID-19.

According to financial information firm FnGuide on the 11th, Jeju Air, the number one domestic LCC, is estimated to record an operating loss of 62.9 billion KRW in the first quarter of this year. Although the operating loss is expected to decrease by about half compared to the previous quarter (-114.6 billion KRW), losses continue as passenger demand normalization is delayed due to the prolonged COVID-19 pandemic. During the same period, Jin Air is expected to record an operating loss of 42.3 billion KRW, and T'way Air is also expected to record an operating loss of 31.4 billion KRW.

With losses continuing after COVID-19, the financial condition is rapidly deteriorating. Last year, Jeju Air’s debt ratio was 438.9%, Jin Air’s 467.4%, T'way Air’s 503.6%, and Air Busan’s 838.5%. The industry expects that if additional funding is not secured in the first quarter of this year, capital erosion where total equity falls below capital stock will be inevitable.

The LCC industry is expanding capital through rights offerings and other means to improve financial structure, while strengthening events such as non-landing sightseeing flights and various promotions.

Jeju Air has introduced a gift ticket called ‘Gifticket’ for popular routes such as Japan, Hong Kong, Taiwan, Macau, Guam, and Saipan, which can be valid for up to five years. Starting next month, they will also operate an in-flight meal cafe run directly by their flight attendants for three months. Popular in-flight meal menus such as bulgogi rice bowl and black pork rice bowl will be sold on the first floor of AK&Hongdae in Mapo-gu, Seoul.

Jin Air has also expanded the sale of in-flight concept ready meals from online to offline. They opened a pop-up store at Lotte Department Store Gwanak Branch where customers can purchase the in-flight meal concept HMR ‘Genie Kitchen The Real’ offline.

Air Busan is expanding its non-landing educational flight program, which was mainly operated for university student internships, to include elementary, middle, and high school students. The program consists of aviation facility tours, introductions to aviation worker jobs, and non-landing flight experiences.

A representative from the LCC industry said, "We are hoping for a recovery in international flight demand in the second half of this year, but even that is uncertain," adding, "The industry is struggling to come up with self-help measures to overcome the COVID-19 hardship."