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 Air's European windfall turns into costly burden
T'way Air's passenger jet / Courtesy of T'way Air
By Lee Min-hyung
LCC feared to report largest loss among budget carriers
T’way Air's European expansion, once hailed as a windfall from the Korean Air-Asiana merger, is turning into an expensive test of its long-haul strategy, as rising fuel, maintenance and currency costs overwhelm healthy passenger demand.
Earlier, the low-cost carrier (LCC) took over routes from Incheon to Paris, Rome, Barcelona and Frankfurt, as part of regulatory remedies tied to the merger of the two full-service carriers. Despite maintaining solid passenger demand, T’way is exposed to challenges of sustaining the business model in the face of worsening profitability.
Indeed, T’way Air is widely forecast to post the largest operating loss among Korea’s budget carriers in the second quarter. According to market tracker FnGuide, the airline’s loss is estimated at 132 billion won ($89 million) between April and June, raising doubts over whether T’way’s expansion into the European routes has benefited the airline in terms of revenues.
On the surface, demand remains healthy. In the first quarter, T’way recorded passenger load factors of 84 percent on its Incheon-Paris route, 93 percent on Incheon-Rome, 90 percent on Incheon-Barcelona and 86 percent on Incheon-Frankfurt.
Several flights operated close to full capacity, suggesting that passenger demand for Europe has remained resilient despite an increasingly competitive market environment.
However, strong occupancy has failed to translate into healthy earnings.
Unlike short-haul services, long-haul operations require significantly higher fixed costs, including additional flight crews, aircraft maintenance and fuel. Longer aircraft utilization also increases opportunity costs, limiting fleet flexibility and raising overall operating expenses.
The financial burden has been exacerbated by a weaker Korean won against the U.S. dollar and elevated jet fuel prices, both of which are considered critical factors in determining LCCs’ profitability.
T'way Air check-in counters at Incheon International Airport's Terminal 1 / Yonhap
Industry officials said that while full-service airlines are generally better positioned to absorb higher costs through premium cabins and broader revenue streams, budget airlines rely far more heavily on competitive ticket pricing. As a result, even flights with high load factors can struggle to generate meaningful profits when operating costs rise sharply.
The deteriorating earnings have also raised concerns over T’way's financial sustainability, as it still pursues an ambitious long-haul expansion strategy.
The airline's performance is being closely watched as a test of whether Korean LCCs can successfully expand beyond their traditional short-haul business. While strong leisure demand has supported passenger traffic, industry officials said sustained profitability — rather than high load factors alone — will ultimately determine the viability of T'way's long-haul strategy.
“The European routes, once seen as a rare opportunity for T'way to elevate its position in the global aviation market, are increasingly becoming a test of whether a budget airline can profitably compete on long-haul international routes amid unfavorable exchange rates, high fuel costs and intensifying competition,” an aviation industry official said.