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.
Budget carriers turn to cargo, unpaid leave amid deepening earnings slump
Passenger jets are parked on the apron of Gimpo International Airport, in this undated file photo. Yonhap
By Lee Min-hyung
LCCs forecast to swing to massive loss in 2nd quarter
Korea's low-cost carriers (LCCs) are ramping up cargo operations and cutting costs to cushion what is expected to be a sharp second-quarter earnings downturn, as prolonged high fuel prices and a weak won continue to erode their profitability.
Facing mounting losses in their core passenger businesses, airlines are seeking to offset earnings pressure by expanding freight operations while implementing cost-saving measures such as unpaid leave for cabin crew.
The deteriorating business outlook has also weighed on investor sentiment, with shares of major listed LCCs posting double-digit declines over the past three months despite the broader rally in the benchmark KOSPI.
Shares of Jeju Air dropped 14.85 percent over the past three months, and Jin Air shares saw losses of 19.03 percent during the same period.
Air Premia has emerged as one of the biggest beneficiaries of the shift toward cargo. The LCC transported 21,424 tons of dedicated cargo, excluding passenger baggage, in the first half of the year, up 52.5 percent from 14,055 tons a year earlier.
T'way Air also reported robust cargo growth, with its freight volume rising 37 percent to 18,000 tons during the same period.
Other carriers are also expanding their cargo businesses to diversify revenue streams. Eastar Jet has broadened its cargo network to 10 international routes this year by adding Tokyo, Taipei, Shanghai and Da Nang to its service. Aero K plans to begin cargo operations on routes departing from Incheon later this month.
Industry officials said cargo has become an increasingly important source of revenue as passenger demand weakens and operating costs remain elevated. While cargo alone is unlikely to fully offset losses from passenger operations, it provides airlines with an opportunity to improve aircraft utilization and generate additional cash flow during a prolonged downturn.
Jeju Air's passenger jet / Courtesy of Jeju Air
At the same time, airlines are stepping up efforts to rein in costs.
Jeju Air accepted applications from cabin crew wishing to take unpaid leave through June, marking its first such program since 2022, when international travel was still severely disrupted due to the COVID-19 pandemic.
T'way Air also offered unpaid leave to cabin crew between May and June, while Aero K opened a similar voluntary program to all employees in May as part of broader cost-cutting efforts.
According to information compiled by FnGuide, all of Korea's major listed low-cost carriers are projected to show operating losses during the April-June period.
Jeju Air is forecast to post an operating loss of 55.4 billion won ($36.8 million), while T'way Air is expected to record a loss of 151 billion won. Jin Air is projected to post an operating loss of 73.3 billion won.
“Airlines are likely to maintain strict cost controls and continue expanding higher-margin ancillary businesses, including cargo, until demand and profitability show more meaningful signs of recovery,” an official from the aviation industry said.