[Exclusive] Jeju Air Introduces Latest Aircraft Worth 5 Trillion Won... Solidifying No.1 Position in LCC

5-Year Wait Ends with Boeing B737-8 'First Unit' Introduction
40 Units Confirmed for Purchase from Boeing in 2018
Contract Worth Approximately $4.4 Billion
Securing Price Competitiveness by Reducing Lease and Operating Costs

Jeju Air has introduced the first Boeing B737-8, the latest model from the aircraft manufacturer, for the first time in five years. Most of the company's existing aircraft were leased used planes rather than newly purchased production units. The company plans to bring in one more aircraft of the same model by the end of the year to replace existing planes and enhance price competitiveness, solidifying its position as the number one LCC (Low-Cost Carrier).

Jeju Air completed the introduction of the first B737-8 on the 4th. By the end of the year, it plans to bring in the second unit and gradually replace the currently operated B737-800NG with the B737-8. The company currently operates 38 B737-800NG aircraft. The newly introduced B737-8 is expected to be deployed on international routes such as Bangkok, Thailand, Singapore, and Japan.

In November 2018, Jeju Air signed a purchase agreement with Boeing for 50 B737-8 aircraft. Of these, 40 were confirmed purchases, and 10 were option purchases. The cost of introducing 40 aircraft was approximately $4.4 billion (about 5.72 trillion KRW) based on the disclosure at that time. This was the first time a national airline had contracted for more than 40 aircraft of a single model.

There are two main reasons why the company is switching to the latest model passenger aircraft. First, it can reduce lease payment burdens. Until now, Jeju Air had introduced aircraft in the form of leases (lease purchases), but when signing the contract with Boeing, it switched to directly purchasing the planes. Jeju Air's debt in the first half of this year was 1.4846 trillion KRW. Of this, aircraft lease debt accounted for 303.4 billion KRW, or 20% of total debt. In other words, directly purchasing aircraft can reduce lease debt in the long term.

The B737-8 also has the advantage of lower fuel and maintenance costs compared to existing aircraft. It consumes more than 15% less fuel than aircraft of the same size. Maintenance costs can also be reduced by more than 10%, saving about 12% of operating costs annually. Additionally, its flight range is 1,000 km longer than the existing B737-800NG, allowing it to operate routes to Central Asia and Indonesia.

As the aviation industry normalizes after the COVID-19 pandemic, demand for aircraft has increased. The industry predicts that if aircraft lease or purchase contracts are signed now, the aircraft will be delivered in four years. Accordingly, airlines are rushing to bring in planes. Eastar Jet completed the introduction of the B737-800 through Gimpo Airport on the 4th, bringing its total fleet to 10 aircraft.

Jeju Air maintains the number one position among domestic LCCs in terms of international passengers and number of flights. According to the Aviation Information Portal System, from January to September this year, Korean Air ranked first in international passengers (9,777,129), followed by Asiana Airlines with 6,410,523 passengers in second place. Jeju Air ranked third with 5,331,841 passengers. In terms of flights, Korean Air was first (58,429 flights), Asiana Airlines second (34,624 flights), and Jeju Air third with 33,665 flights.