Korea's aviation industry undergoes major M&A shakeup

Korea’s low-cost carrier (LCC) industry is heading for a major shakeup, as VIG Partners moves to acquire Air Premia, seeking synergies by combining the long-haul-focused carrier with its existing Eastar Jet, which has a stronger presence on short-haul routes.

VIG is reportedly in negotiations with AP Holdings and Tire Bank to acquire about 70 percent of Air Premia, with the transaction valued at around 300 billion won ($217 million).

The potential deal would mark VIG’s second major move in Korea’s LCC industry since it acquired Eastar Jet in 2023.

The latest move would give the private equity firm access to two airlines with distinctly different route strategies: Eastar has focused largely on short- and medium-haul routes, while Air Premia has built its business around long-haul services, including flights particularly to the United States.

The combination could therefore offer a way to build scale across a broader network, rather than simply adding another airline to VIG’s portfolio. Eastar Jet and Air Premia generated combined sales of about 1.21 trillion won last year, according to both firms.

The timing is significant in that Korean Air’s acquisition of Asiana Airlines is set to reshape the LCC market through the integration of their three LCC affiliates — Jin Air, Air Busan and Air Seoul. The combined Jin Air is expected to operate roughly 60 aircraft and emerge as the country’s largest LCC when it launches in March next year.

That prospect is putting pressure on smaller carriers to rethink a business model that has long been criticized for excessive supply and fragmented competition. Airlines are now increasingly looking to expand their scale, diversify networks and improve fleet economics, rather than competing primarily through short-haul routes and fares.

VIG’s potential acquisition of Air Premia also comes against a similar backdrop, even if nothing specific has been confirmed over whether the private equity will merge both LCCs later.

If Eastar and Air Premia are eventually integrated, the converged carrier would combine short- and medium-haul connectivity with Air Premia’s long-haul network, potentially allowing it to spread fixed costs across a larger operation and offer a wider range of routes.

The upcoming launch of the integrated Jin Air could accelerate that pressure. With a much larger fleet and revenue base, the new carrier could force smaller competitors to either achieve comparable scale or establish more clearly differentiated business models.

“The launch of the converged Jin Air will pave the way for fewer, larger carriers to compete across broader networks — accelerating the transition from Korea’s long-standing fragmented LCC landscape to one increasingly shaped by economies of scale,” an official from the aviation industry said.