Korean LCCs mull their options as alliances falter

[Courtesy of Jeju Air Co.]

South Korean low-cost carriers (LCCs) are navigating challenges in their bid to maintain competitiveness as LCCs alliances falter in the Asia-Pacific region, including the recent closure of the Value Alliance.

According to sources in the airline industry on Tuesday, Jeju Air Co., formerly a member of the Value Alliance, terminated its joint venture contract and disposed of all related shares early in 2024 following the alliance’s closure.

Jeju Air‘s quarterly report shows that it sold the entirety of its 13.04 percent stake in Value Alliance Travel Systems in the first quarter of the year. “With the suspension of Value Alliance operations, the joint venture contract was terminated and the shares were disposed of accordingly,” Jeju Air explained.

Formed in 2016, the Value Alliance was the world’s largest LCC cooperative that incorporated LCCs from East Asia and Australia, including Jeju Air, Cebu Pacific operated by Cebu Air Inc. (Philippines), Nok Air operated by Nok Airlines Public Co. (Thailand), Vanilla Air Inc. (Japan), and Tigerair Australia operated by Tiger Airways Pty (Australia).

[Courtesy of Jeju Air Co.]

The alliance took an interline approach without acquiring long-haul aircraft by combining and selling each airline‘s routes. But as LCCs from Australia and Japan left the alliance early on and the global airline industry faced a crisis during the COVID-19 pandemic, internal cohesion among the members fell and led to the suspension of operations.

Eastar Jet Co. joined another LCC alliance, U-Fly Alliance, in 2016, but this alliance has struggled to maintain operations after Hong Kong Express, which led the alliance, was sold to Cathay Pacific Airways Ltd. in 2019.

As they work through these challenges, Koreans LCCs are striving to strengthen their competitiveness by independently enhancing interline agreements with overseas airlines. Starting with an interline agreement with United Airlines by United Airlines Holdings Inc. in 2016, Jeju Air has since inked agreements with 14 airlines covering North America, Europe, and Southeast Asia, including Air Canada and Etihad Airways by Etihad Airways PJSC. Similarly, T’way Air Co. won an interline agreement with Virgin Australia in March 2024 and is currently operating codeshare flights.