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LCCs expand domestic routes for holiday season, but profitability remains questionable

(Jeju Air)
(Jeju Air)

South Korea’s low cost carriers have been opening more domestic routes to prepare for the upcoming summer holiday season, but the profitability of operating such routes remains questionable due to fierce competition over price, industry sources said Sunday. 

After the latest COVID-19 outbreak, budget carriers have been focusing on expanding more domestic routes as part of an effort to secure liquidity in the short run. 

Market data showed that the combined cashable assets of four listed LCCs –- Jeju Air, Jin Air, T’way Air, Air Busan -- came at 363.8 billion won ($302 million) in the first quarter, a 61.8 percent drop on-year. 

Jeju Air has recently added more flights to the Gwangju-Jeju route and has also extended the non-regular Gimpo-Gwangju route to four times a week.
Jin Air opened a Gimpo-Yeosu route on June 19.

T’way Air, which until last year only had three routes connecting Gimpo, Gwangju and Daegu to Jeju until, recently launched routes between Gimpo and Busan, and Cheongju and Jeju. Last Friday, the air carrier opened Gimpo-Gwangju, Gwangju-Yangyang, Busan-Yangyang routes.

As more tickets become available, LCCs have been releasing them at the lowest price possible, with some of them even cheaper than the cost of a round-trip train ticket. 

Last week, T’way sold a ticket connecting Gimpo to Jeju for just 4,000 won, excluding the airport fee. It has been promoting an event selling tickets for domestic destinations that depart before August 31, for 9,900 won.

Amid budget carriers’ plan to recover sales by opening more domestic routes as service to overseas destinations remain restricted, industry experts said the heated competition for domestic route operation could cause negative results. 

“There is a fierce competition among LCCs over releasing cheaper domestic route tickets, which does not help the air carriers’ sales which have been severely damaged by the latest virus outbreak,” said an industry insider. 

Other experts said that there are also limits to how much an air carrier can profit through only the operation of domestic routes, without knowing when exactly global aviation demand will recover to the previous level.

As of Saturday, a total of 179 countries have restricted or banned entry of visitors departing from South Korea over virus spread concerns, according to the Ministry of Foreign Affairs. 

By Kim Da-sol (ddd@heraldcorp.com)
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