Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
T’way, Eastar in dilemma over unprofitable Jeju route
A passenger airliner from Eastar Jet / Courtesy of Eastar Jet
By Lee Min-hyung
Fuel cost hike, strengthening dollar force LCCs to focus on long-haul routes
T’way Air and Eastar Jet face a quandary over newly acquired rights to operate flights between Jeju Island and Gimpo International Airport in Seoul, as the two low-cost carriers (LCCs) left most of the slots unused to prioritize higher-margin international flights — even at the cost of a severe ticket shortage on the route.
The seat shortage stems largely from budget airlines scaling back domestic operations in favor of more lucrative international routes amid worsening macroeconomic risks — represented by the strengthening dollar and rising fuel costs.
Both LCCs secured the additional flight slots following Korean Air's takeover of Asiana Airlines this year, but they have been unable or unwilling to fully utilize them due to the route’s limited profitability.
As part of remedies tied to the Korean Air-Asiana integration, 13 slots on the Jeju-Gimpo route were redistributed from the two full-service carriers to four LCCs in March. Eastar Jet received six slots, Jeju Air four, Parata Air two and T’way Air one.
However, not all of the newly allocated capacity has been put into service.
According to statistics from Korea Airports Corp., Eastar Jet, which was granted six daily slots, had the capacity to operate 366 additional flights on the Jeju-Gimpo route during April and May, compared with the same period last year. The carrier, however, operated only 180 more flights, utilizing less than half of the expanded capacity.
Even if T’way Air gained enough slot capacity to operate 61 additional flights during the two months, it ended up reducing 60 flights from a year earlier apparently due to the profitability issue.
T'way Air's jetliner / Courtesy of T'way Air
In contrast, Jeju Air and Parata Air fully utilized their newly assigned slots.
Industry officials said the reluctance of T’way and Eastar to expand the route to the southern island reflects their growing financial pressure. Unlike full-service airlines, such as Korean Air, budget carriers operate with more limited aircraft fleets and financial resources, making them particularly vulnerable to fluctuations in the fuel price and exchange rate.
As a result, airlines are prioritizing medium- and long-haul international routes where they can gain more returns than from domestic services. The strategy has become increasingly important, as carriers seek to offset rising operating costs and preserve margins.
T’way and Eastar faced criticism for failing to maximize the use of slots ahead of the summer vacation season. Customers' complaints are also increasing over the severe ticket shortage to the nation’s most popular tourist destination.
According to market tracker FnGuide, T’way Air is estimated to report an annual operating loss of around 169 billion won ($110 million) this year. Outlook for Eastar also remains murky due to the unfavorable macroeconomic environment. Eastar reported an operating loss of 20.7 billion won last year.
“LCCs are more financially vulnerable than full-service carriers, so they focus more on profitable long-haul routes than domestic flights for survival, even if they face criticism over the unused slot,” an official from the aviation industry said.