LCC Also Undergoing Major Changes... Jeju Air Rises to 2nd Place with Jin Air Merger [Birth of a Mega Carrier]

Jin Air, Air Seoul, and Air Busan Merge
Rise to No.1 LCC...Threatening Former Leader Jeju Air
Active M&A Expected...Focus on 'Eastar Air'

The domestic low-cost carrier (LCC) industry is facing a major upheaval due to the merger of Korean Air and Asiana Airlines. Their subsidiaries, Jin Air, Air Seoul, and Air Busan, are also merging, instantly becoming the number one player. It is expected that the remaining airlines, including the current leader Jeju Air, may engage in mergers and alliances to survive.

According to industry sources on the 28th, the total revenue of Jin Air, a subsidiary of Korean Air, and Air Seoul and Air Busan, subsidiaries of Asiana Airlines, reached 2.4785 trillion won last year. This far surpasses Jeju Air’s 1.724 trillion won, the current industry leader. If the merger of these three companies is finalized, a giant competitor will emerge in the LCC sector.

The airlines that will immediately compete with the integrated LCC are T’way Air and Air Premia. Currently, these companies have investments from the Daemyung Sono Group. Since these airlines are focusing on long-haul routes to Europe and the United States to find new opportunities, they will face the fiercest competition with the so-called ‘integrated LCC.’ Because there is little route differentiation among LCCs, there are concerns about a ‘chicken game.’ Rapidly increasing the fleet size to grow is also difficult. Funding is an issue, and acquiring aircraft can take from several months to several years.

Accordingly, there is speculation that Jeju Air, the current number one, will enter the airline merger and acquisition market. In particular, there is a forecast that Jeju Air may show interest in acquiring Eastar Jet, which was purchased last year by the private equity firm VIG Partners. Jeju Air previously attempted to acquire Eastar Jet in 2019. Currently, VIG Partners is aggressively expanding the business while improving Eastar Jet’s financial structure. After escaping bankruptcy, they have added five aircraft and increased their flight routes.

An industry insider explained, "The emergence of an integrated LCC can bring as much change as the merger of full-service carriers (FSCs). If companies fall behind in this competition, it will be difficult to change the landscape later, so everyone will actively jump in."