Budget airlines cut int'l flights, furlough crews as fuel prices soar

Korea's budget airlines have slashed nearly 900 round-trip international flights and furloughed cabin crew as surging jet fuel prices, driven by the ongoing conflict in the Middle East, squeeze the industry.

More low-cost carrier (LCC) flights could be canceled through June as some airlines have yet to finalize their flight schedules, industry insiders told the JoongAng Ilbo on Sunday. 

Jeju Air, the country's largest LCC , has cut 187 round-trip international flights in May and June — about 4 percent of its international operations. Routes from Incheon to Phu Quoc and Da Nang, Vietnam, Bangkok and Singapore have been reduced from daily service to three or four times a week, with those to Hanoi, Vietnam also set to see cuts. Service to Vientiane, Laos, has been suspended entirely for two months. 

Jeju Air has also announced unpaid leave for cabin crew as a result of the reductions.

Jin Air has pulled 176 round-trip flights, focusing on routes to Guam and Phu Quoc. Air Busan has cut 212 round-trip flights across Da Nang, Bangkok, Cebu in the Philippines and Guam. Eastar Jet, Air Seoul, Air Premia and T'way Air have all scaled back mid-range Southeast Asian routes as well.

The concentration of cuts on Southeast Asian routes reflects the economics of fuel costs. 

"On medium- and long-haul routes, fuel surcharge burdens are significant enough that travel demand is shrinking fast," one industry spokesperson said. "Short-haul routes like Japan, by contrast, are holding up relatively well."

Jet fuel prices have risen to roughly two and a half times their pre-war levels. The average price of Singapore jet fuel — the benchmark used to set May fuel surcharges — has exceeded $214 per barrel, a jump of more than 150 percent in just two months.

Airlines have already moved onto crisis footing beyond flight cuts. T'way Air, Jeju Air, and Aero K Airlines have implemented unpaid leave programs. Jin Air has delayed payment of employee bonuses. Even the full-service carriers Korean Air and Asiana Airlines have shifted to austerity mode, focusing on cost reduction.

The concern is that budget carriers are far more financially exposed than their larger competitors. T'way Air has posted losses for two consecutive years and now carries a debt-to-equity ratio exceeding 3,400 percent. Air Premia has fallen into complete capital impairment, meaning its liabilities exceed its total assets.

Analysts say first-quarter results held up reasonably well, but expect conditions to deteriorate sharply from the second quarter onward as high fuel costs, a weak won, and softening travel demand hit simultaneously. Financially fragile carriers could fail to survive, they add, with some drawing explicit comparisons to the collapse of U.S. budget airline Spirit Airlines.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

BY JEONG JAE-HONG [[email protected]]