Jeju Air may opt for IPO to buy planes

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Jeju Air may opt for IPO to buy planes

Jeju Air, a Korean budget airline, is considering an initial public offering as it plans to add more planes to meet growing travel demand in the Asia Pacific region.

The airline plans to add three aircraft a year until 2016, CEO Choi Kyu-nam said Wednesday. Jeju Air operates 13 Boeing 737-800s in Korea and flies to 10 overseas destinations, including Hong Kong and Bangkok.

Jeju Air’s plan to sell shares follows those of low-cost carriers in the region, including VietJet Aviation Joint Stock, which last month said it may sell shares to the public within 18 to 42 months.

Asia Pacific air traffic will expand 6.4 percent a year during the next 20 years, according to jet maker Boeing. Almost half of the world’s air traffic growth will be driven by travel to, from or within the Asia Pacific in the period, Boeing forecast.

“I hope we’ll be able to do the IPO soon,” Choi said in an interview in Seoul, without saying how much the Jeju airline aims to raise. “It won’t happen this year.”

About 15 low-fare carriers started flying in the Asia Pacific region over the past decade, according to the International Air Transport Association.

The region has been the most profitable worldwide for the past four years, according to the association.

The Indonesia unit of AirAsia Bhd., Asia’s biggest budget carrier, may hold an IPO in the fourth quarter, Group Chief Executive Officer Tony Fernandes said in August.

AirAsia X Bhd., AirAsia’s long-haul arm, started trading in Kuala Lumpur July 10 after raising 988 million ringgit ($301 million).

Nok Airlines, a low-cost carrier controlled by Thai Airways International, debuted in Bangkok in June after raising about 4.9 billion baht ($152 million) in an IPO.

Budget carriers’ market share in the Asia Pacific region rose to 24 percent last year from 1.1 percent in 2001, according to the CAPA Centre for Aviation, an industry consultancy.

Asia Pacific overtook North America as the world’s biggest aviation market in 2009, according to IATA.

The region is expected to add about 380 million travelers, including domestic and international, between 2012 and 2016 to 1.2 billion, IATA forecast in December.

That growth forecast prompted Indonesia’s PT Lion Mentari Airlines in March to place an order for 234 aircraft from Airbus SAS, its second commitment in two years to purchase more than 200 planes.

Including turboprop aircraft, the airline has a total of 700 planes on order.

In 2011, AirAsia ordered 200 Airbus A320neo aircraft valued at $18 billion.

Airlines globally are likely to generate net income of $12.7 billion in 2013 as capacity cuts help pack planes to record levels, IATA said in June. Carriers in all regions should post a profit this year, led by airlines in Asia with projected earnings of $4.6 billion and North America with $4.4 billion, IATA said.

Bloomberg

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