[Alpha Biz= Paul Lee] South Korea’s low-cost carriers (LCCs) are scrambling to stay afloat as soaring oil prices triggered by the Middle East conflict weigh heavily on their operations, forcing airlines to implement emergency cost-cutting measures including route reductions and unpaid leave programs.

According to industry sources on May 10, Jeju Air, the country’s largest LCC, announced on May 8 that it will offer voluntary unpaid leave to cabin crew for the month of June. T'way Air has already begun accepting applications for unpaid leave covering May and June.

Flight reductions are accelerating across the sector. Confirmed cuts have reached approximately 900 round-trip flights to date. Jeju Air has reduced 187 international flights—about 4% of its total international schedule for May and June—while Jin Air has cut 176 flights through this month, mainly on routes such as Phu Quoc and Guam. Other carriers, including Air Busan (212 flights), Eastar Jet (150 flights), Air Premia (73 flights), and Air Seoul (51 flights), are also scaling back operations. With many airlines yet to finalize their June schedules, further reductions are expected.

Full-service carriers (FSCs) are also closely monitoring the situation. Asiana Airlines plans to cut 27 flights across six routes—including Istanbul and Phnom Penh—through July, while Korean Air has not yet reduced flights but is operating under an emergency management framework to closely track market conditions.

The primary driver behind the cuts is the sharp rise in jet fuel prices. Since the outbreak of conflict in the Middle East, fuel costs have surged to approximately 2.5 times previous levels. Singapore jet fuel prices—used as a benchmark for fuel surcharges—averaged 511.21 cents per gallon (USD 214.71 per barrel) over a one-month period starting in mid-March, marking a 150.1% increase compared to just two months earlier. A weakening Korean won against the U.S. dollar has further exacerbated cost pressures, increasing expenses for fuel and aircraft leasing.

Concerns are mounting over the financial stability of LCCs, many of which already have fragile balance sheets. Analysts expect a wave of losses in the second quarter as the full impact of the oil price surge materializes. T’way Air’s debt ratio exceeded 3,400% at the end of last year after posting consecutive annual losses, while Air Premia is in a state of complete capital impairment, with a capital erosion ratio of 132%. Under Korean law, failure to resolve capital impairment could result in the revocation of an airline’s operating license.

 

 

 

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