Korean budget carriers post losses in Q2 despite record sales

[Photo by Lee Chung-woo]

South Korean low-cost carriers (LCCs) have posted operating losses for the second quarter despite record sales due to skyrocketing oil prices and weak won against the U.S. dollar.

According to data from the Financial Supervisory Service on Wednesday, the country’s three major budget carriers – Jeju Air Co., T’way Air Co., and Jin Air Co. – swung to operating losses in the second quarter.

T‘way Air posted an operating loss of 21.5 billion won ($16.1 million), Jeju Air 9.5 billion won, and Jin Air 900 million won. Jin Air suffered 5.9 billion won in net losses.

In terms of sales, however, Jeju Air raised 967.1 billion won in the first half of the year, T’way Air 748.8 billion won, and Jin Air 738.5 billion won.

The sales growth was fueled by a surge in travel demand. Passenger traffic on international flights from domestic airports rose by 45 percent from 29.5 million in the first half of last year to 42.87 million this year.

Operating losses came as the budget carriers spent more on wages, with business returning to pre-pandemic levels.

T‘way Air said the average employee pay grew from 28 million won in the first half of last year to 36 million won this year, causing the airline’s payroll expenses to jump from 7.5 billion won in the first half of last year to 12.6 billion won this year.

The depreciation of the Korean won against the greenback also expanded losses.

The U.S. dollar traded at 1,371 won on average in the second quarter, up 4.2 percent from 1,315 won in the previous year. Airlines pay aircraft lease and oil expenses in U.S. dollars.