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Airlines' worries deepen amid 2nd wave of infections
Passengers heading to Jeju Island line up at the Gimpo International Airport departure terminal on July 27. Domestic airlines, especially budget carriers, have relied heavily on domestic routes to survive the COVID-19 crisis, but the second wave of infections is raising concerns of a decline in domestic travel. / Korea Times photo by Bae Woo-han
By Jun Ji-hye
By Jun Ji-hye
Domestic airlines are facing increasing concerns that the airline industry's financial crisis could worsen as the second wave of COVID-19 infections spreads quickly around the country.
Carriers, especially low-cost carriers (LCCs), have mostly been relying on domestic routes to survive the COVID-19 crisis as international travel has become difficult due to the pandemic.
But a new wave of infections in Korea ― with daily the number of new virus cases remaining at three digits since Aug. 13 ― could lead to a decline in domestic travel demand.
According to data compiled by the Korea Civil Aviation Association, the number of passengers on international routes of local carriers dipped nearly 98 percent in the second quarter from a year earlier.
In contrast, the number of passengers on domestic routes dropped 38 percent over the period due mainly to an increase in demand for trips to local destinations.
“The domestic routes are the budget carriers' last hope to survive the crisis,” an official from a Seoul-based budget carrier said. “The latest development is causing concerns over falling demand for domestic travel.”
Since the coronavirus outbreak, LCCs have been striving to expand domestic routes and increase operations on those routes in an effort to improve profitability.
Officials said most LCCs have managed to avoid bankruptcy by attracting a considerable number of domestic travelers, especially during the summer vacation season.
According to data tallied by the Ministry of Land, Infrastructure and Transport, about 3.45 million passengers used domestic routes operated by LCCs, including Jeju Air, Jin Air and Air Seoul, last month. The figure was up 11 percent from a year earlier.
But this did not lead to a profitability improvement for the budget carriers as the increase in supply resulted in more competition.
LCCs continued to post operating losses in the April-June period after losses in the January-March period.
The operating loss of Jeju Air, the country's largest budget carrier, was 148 billion won ($125 million) during the first half of the year, while Jin Air and T'way Air posted operating losses of 91 billion won and 70 billion won, respectively.
The nation's two full-service airlines posted surprise earnings in the second quarter due to revenue from cargo business. But their concerns also persist, because the prolonged public health crisis could delay the normalization of their international operations, their biggest revenue source.