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South Korea’s low-cost carriers are seeking new growth avenues ― going public ― led by industry leader Jeju Air on the back of its growing market share in the domestic and international routes that threaten full-service carriers.
Last week, the country’s No. 1 budget carrier Jeju Air said it expects to raise around 154 billion won ($128.4 million) by issuing 5.5 million shares at a price range of 23,000-28,000 won per share.
The carrier owned by Aekyung Industrial is expected to list in November on the stock market, the first initial public offering for a local budget airline.
“Jeju Air will use the proceeds to secure sustainable business competence and operating expenses such as engine and aircraft purchases,” a representative from the airline said.
The company said it will invest 60 billion won to buy the B727-800 to expand short- and medium-haul routes, such as to China and other East Asia countries. By 2018, it plans to operate 50 routes to record 1 trillion won in sales and 100 billion won in operating profits.
Currently, it operates four domestic routes and 24 international routes, mainly in the Asian-Pacific region. The international routes account for 61 percent of the airline’s total revenues.
According to the Korea Civil Aviation Development Association, the country’s five budget carriers’ market share on international routes has gradually increased to 15.5 percent in the first half of 2015 from 9.4 percent in 2013.
On the other hand, the shares of the country’s two full-service carriers, Korean Air and Asiana Airlines, have dropped in recent years to a combined 44 percent in June this year from 57 percent in 2011.
The other two local no-frills airlines Air Busan and Eastar Jet are closely watching Jeju Air’s moves in going public, hoping to secure fresh capital to fuel their respective growth.
“Sixteen shareholder firms are gathering opinions on Air Busan’s IPO plan to make the second leap for the airline,” said an official of Asiana’s budget unit, which is expected to go public in the first half of 2016.
Eastar Jet is reportedly in talks with a securities firm for its IPO, but experts said it suffers from impaired capital and should improve its financial structure first.
By Park Han-na (hnpark@heraldcorp.com)
Last week, the country’s No. 1 budget carrier Jeju Air said it expects to raise around 154 billion won ($128.4 million) by issuing 5.5 million shares at a price range of 23,000-28,000 won per share.
The carrier owned by Aekyung Industrial is expected to list in November on the stock market, the first initial public offering for a local budget airline.
“Jeju Air will use the proceeds to secure sustainable business competence and operating expenses such as engine and aircraft purchases,” a representative from the airline said.
The company said it will invest 60 billion won to buy the B727-800 to expand short- and medium-haul routes, such as to China and other East Asia countries. By 2018, it plans to operate 50 routes to record 1 trillion won in sales and 100 billion won in operating profits.
Currently, it operates four domestic routes and 24 international routes, mainly in the Asian-Pacific region. The international routes account for 61 percent of the airline’s total revenues.
According to the Korea Civil Aviation Development Association, the country’s five budget carriers’ market share on international routes has gradually increased to 15.5 percent in the first half of 2015 from 9.4 percent in 2013.
On the other hand, the shares of the country’s two full-service carriers, Korean Air and Asiana Airlines, have dropped in recent years to a combined 44 percent in June this year from 57 percent in 2011.
The other two local no-frills airlines Air Busan and Eastar Jet are closely watching Jeju Air’s moves in going public, hoping to secure fresh capital to fuel their respective growth.
“Sixteen shareholder firms are gathering opinions on Air Busan’s IPO plan to make the second leap for the airline,” said an official of Asiana’s budget unit, which is expected to go public in the first half of 2016.
Eastar Jet is reportedly in talks with a securities firm for its IPO, but experts said it suffers from impaired capital and should improve its financial structure first.
By Park Han-na (hnpark@heraldcorp.com)
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Articles by Korea Herald
