Jeju Air gambling on larger fleet as rivals flood in

Jeju Air is continuing to gamble on buying more aircraft to improve its revenue stream.

The nation’s largest low-cost carrier (LCC) said yesterday its 12th aircraft arrived on Saturday and it will start operating the plane from next year. Its fleet of Boeing 737-800s is the largest among all local LCCs. Jin Air has eight and Air Busan nine.

Jeju Air said the latest edition to its fleet will enable it to add another 156 domestic flights, or carry 29,000 more passengers, from January to March next year. It recently bumped up its total domestic flights from 274 to 338 a week as it began applying its busy winter flight schedule from Oct. 28.

The new plane also supports it plan to expand the number of routes to China. Jeju Air will resume its flight from Jeju to Wenzhou, in southeastern Zhejiang Province, from Jan. 4. The route was opened on a temporarily basis this summer and fall.

It also plans to add six new flights to China, half of them leaving from Incheon and another half from Jeju.

Jeju Air has purchased four new aircraft this year and launched seven new international routes. Two weeks ago, it announced that its cumulative sales for 2012 already exceeded 30 billion won ($27.63 million), making it the first among local LCCs to reach the mark.

“Since LCCs from Japan and other Southeast Asian countries are flocking to the local market, we need a big-picture strategy to defend our business,” the company said in a statement. “As we announced in our yearly plan, we are investing actively in order to build economies of scale and prepare against the influx of foreign LCCs.”

However, some industry watchers said its investment is no guarantee of success as the profitability of many of its routes seems to be declining.

Jeju Air earlier this month announced its third quarter performance, usually a time of top profits in the industry. Sales hit 93.6 billion won, up 18.9 percent from last year. However, operating profit was slashed by nearly one-third to just 4.4 billion won.

Its accumulated operating profit for 2012 through three quarters also slid 66 percent on-year to 5 billion won. This compares poorly to Jin Air, which amassed 17.9 billion won.

Analysts said Jeju Air should develop exclusive routes to enhance its profitability. Currently, the airline operates 14 international routes, but only the route from Gimpo to Nagoya in Japan has no competition from local carriers.

The airline is scheduled to fly from Incheon to Cebu, Philippines, beginning Thursday, but this route is also already run by Korean Air, Asiana Airlines and Jin Air.

By Joo Kyung-don [kjoo@joongang.co.kr]