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Middle East tensions expose fragility of Korea’s low-cost carriers

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By Lee Min-hyung
  • Published KST
  • Updated KST
Jeju Air's Boeing 737-800 passenger jet / Courtesy of Jeju Air

Jeju Air's Boeing 737-800 passenger jet / Courtesy of Jeju Air

Korea’s major low-cost carriers (LCCs) are expected to face structural deficits as the escalating armed conflict in Iran drives up global oil prices.

The surge in crude oil prices, coupled with the strengthening dollar against the Korean won, presents two major cost burdens to budget airlines. Concerns are rising that the latest Middle East crisis will erode the profitability of the LCCs even further, after they reported sharp earnings declines last year.

West Texas Intermediate crude oil was traded at around $65 on Thursday, but its value soared to more than $74 on Sunday when the conflict between the United States and Iran reached its peak.

Unlike full-service carriers with diversified revenue streams, LCCs such as Jeju Air, Jin Air and T’way Air are particularly vulnerable to external uncertainties, as most of their operating costs in fuel, aircraft leasing and maintenance are denominated in dollars.

LCCs’ mounting financial strain was clearly reflected in their steep earnings decline last year, driven largely by the prolonged appreciation of the U.S. dollar against the Korean won.

Jeju Air turned to a deficit with an operating loss of 110.9 billion won ($76.1 million) in 2025. T’way Air also reported an operating loss of 265.5 billion won during the same period.

Jin Air swung to a deficit last year, reporting an operating loss of 16.3 billion won, its first annual loss since 2022, in the aftermath of the COVID-19 pandemic.

Industry watchers said ongoing volatility in global energy markets and currency rates will likely exacerbate the fragile financial positions of Korean LCCs.

With limited ability to pass rising fuel costs on to price-sensitive travelers, the budget carriers may face deeper deficits without strategic shifts in route networks or cost structures, they said.

“The weak won and elevated jet fuel prices are dual headwinds striking LCCs,” an aviation industry official said. “If oil prices remain elevated against the backdrop of geopolitical risk, structural losses could become more entrenched in their earnings this year.”