Jeju Air to spread the wings of 40 new aircraft in more countries

Jeju Air will spend 320 billion won ($232.7 million) to purchase 40 new aircraft, despite its financial struggles, aiming to fly to more countries as travel demand takes off.

Jeju Air’s aircraft takes off from Incheon International Airport. [JEJU AIR]

The company announced Tuesday it will be buying 40 B737-8s, which will be delivered starting next year. The 40 planes will be wholly owned by Jeju Air.

The new planes’ one-way flight range is 1,000 kilometers (621 miles) longer than that of the company's existing fleet of B737-800s, and will allow the carrier to fly to Indonesia and Central Asian countries.

The new models will save 15 percent on jet fuel compared to the existing fleet, which the company expects will help improve its profitability.

Jeju Air, experiencing a liquidity crisis, will finance the purchase by issuing new shares in November. Its parent AK Holdings will participate, announcing it will buy newly issued Jeju Air shares using the money earned by issuing bonds worth 130 billion won.

“Our recent plan to issue new shares is very different from our past ones,” said a spokesperson for Jeju Air. “In past cases, we issued new shares to overcome our financial struggles, but this one can be considered an investment made to enhance our competitiveness and solidify our position as a leading carrier in the post-pandemic situation.”

Although Jeju Air is betting on a future with high travel demand, some say the decision might be a struggle for the company.

"It was likely that Jeju Air would issue new shares, but the amount was bigger than expected,” said Park Seong-jin, an analyst at KB Securities. “By purchasing the new aircraft fleet, the annual interest that Jeju Air has to pay will increase from 41.4 billion won this year to 123.2 billion won in 2027.”

Other airlines are also trying to branch out to new countries by adding new aircraft. Air Premia, a budget carrier that started business in 2017, will add two new planes this month and start offering Incheon-Los Angeles flights in October.

BY LEE TAE-HEE [lee.taehee2@joongang.co.kr]