South Korean airlines are ramping up international routes, particularly to China, Japan and Southeast Asian countries, in a bid to boost profitability in the second half, capitalizing on a stronger local currency and falling fuel costs.
According to the Korean aviation industry, the country’s largest full-service carrier, Korean Air Lines Co., increased its weekly flights to China to 194 this month from 188, reaching 90% of the pre-pandemic volume.
The carrier reviews a plan to add more flights to its China routes in the second half.
Asiana Airlines Inc., now a Korean Air subsidiary, has also expanded its weekly flights to China by 26 since May.
The country’s low-cost carriers (LCCs) are following suit, with Jeju Air Co. increasing its China services to seven flights a week.
Other LCCs are even branching out to long-haul destinations, with T’way Air Co. planning to launch flights to Vancouver next week, the first Korean budget carrier to offer service to Canada.
Air Premia Inc. is adding a flight to Honolulu, Hawaii, this month.
INTERNATIONAL TRAVEL DEMAND SURGES PAST PRE-COVID LEVELS
(Graphics by Daeun Lee) The renewed international push comes amid a strong rebound in overseas travel demand.
According to Korea’s Ministry of Land, Infrastructure and Transportation, international outbound air passengers from Korea in the first half of this year grew 7.1% from a year ago to 45.83 million, surpassing the previous record of 45.56 million in 2019.
Notably, the country’s air travelers to China increased by 24.3% to 7.81 million over the same period, following Beijing’s introduction of a visa-free policy for short-stay travelers.
Traffic to Japan also climbed 9.9% to 13.43 million.
Korean air carriers expect their expanded international services to benefit from a favorable cost environment. A stronger Korean won will reduce the burden of dollar-denominated expenses such as fuel and aircraft leasing, while easing oil prices will further improve margins.
Air carriers settle jet fuel and aircraft maintenance costs in US dollars, and fuel costs usually account for about 30% of their operating costs.
“Expanding international routes, typically more profitable than domestic ones, should lift earnings,” said an aviation industry official. “But intense competition could drive fares down and eat into margins.”
After recording the best-ever earnings last year, Korean air carriers suffered poor earnings in the first half of this year.
All of the country’s four listed budget carriers – Jeju Air, Jin Air Co., T’way Air and Air Busan Co. – forecast operating losses in the second quarter.
Jeju Air’s loss is projected to swell to 40 billion won ($29.1 million) in the quarter from a 5.3 billion loss a year earlier. T’way Air is also forecast to report 41.5 billion won in operating loss versus a 21.5 billion won loss over the same period.
