Jeju Air posts earn­ings sur­prise on busi­ness agility

The Korea Times - - BUSINESS - By Lee Min-hyung mh­lee@ktimes.com

Jeju Air posted its largest growth in earn­ings be­cause of the firm’s sta­ble rev­enue struc­ture and busi­ness agility, the com­pany said Wed­nes­day.

The na­tion’s top bud­get car­rier out­per­formed other listed air­line op­er­a­tors here, chalk­ing up 16.2 bil­lion won ($14.43 mil­lion) in op­er­at­ing profit dur­ing the April-June pe­riod, up 2,448 per­cent from the pre­vi­ous year. Its sales reached 228 bil­lion won, up 40.7 per­cent from the pre­vi­ous year, ac­cord­ing to the com­pany.

The growth is note­wor­thy as the sec­ond quar­ter is con­sid­ered an off-sea­son for most air­lines. The two other listed car­ri­ers are Korean Air and Asiana Air­lines.

The earn­ings growth rate from both com­pa­nies is far short of that of Jeju Air. Korean Air re­ported 8.5 per­cent growth year-on-year in its op­er­at­ing profit of 159.2 bil­lion won dur­ing the same pe­riod. Asiana Air­lines’ op­er­at­ing profit reached 42.8 bil­lion won, up 48.7 per­cent from the same pe­riod a year ear­lier.

Jeju Air at­trib­uted its growth to its ag­ile man­age­ment strat­egy by cut­ting ticket prices dur­ing the off-sea­son and mak­ing up for the loss by fo­cus­ing on reap­ing an­cil­lary rev­enues.

The strat­egy is widely used by low-cost car­ri­ers based in Europe and North Amer­ica. Non-ticket rev­enue sources in­clude fees from bag­gage trans­porta­tion and on-board food.

“We were able to sta­bi­lize our rev­enue struc­tures by adopt­ing this strat­egy,” a com­pany of­fi­cial said. “Jeju Air will push ahead with the busi­ness tac­tic to tackle the ever-grow­ing un­cer­tainty in the air­line in­dus­try. This will al­low us to re­main more flex­i­ble and ag­ile in deal­ing with un­ex­pected ex­ter­nal po­lit­i­cal or eco­nomic risks.”

The com­pany is also mak­ing ag­gres­sive in­vest­ments to fur­ther di­ver­sify its rev­enue streams. Jeju Air is in­vest­ing in a bud­get ho­tel which is un­der con­struc­tion near Hongik Univer­sity in western Seoul.

“By launch­ing a ser­vice to link our pas­sen­gers to the ho­tel, Jeju Air is ex­pected to cre­ate an­other sta­ble rev­enue source,” the of­fi­cial said. “The ho­tel is set to open no later than the end of next year.”

To en­hance lead­er­ship as the na­tion’s lead­ing bud­get car­rier, Jeju Air also plans to in­crease its num­ber of pas­sen­ger planes to 40 next year. This will so­lid­ify its pres­ence as the top bud­get car­rier here, widen­ing its gap against late­com­ers, ac­cord­ing to the of­fi­cial.

The com­pany be­came the first of Korea’s low-cost car­ri­ers to go pub­lic on the bench­mark KOSPI in Novem­ber 2015. As of now, Jeju Air op­er­ates 42 routes in­clud­ing 36 in­ter­na­tional ones. By the end of this year, the com­pany plans to op­er­ate flights on 50 do­mes­tic and in­ter­na­tional routes.

Cour­tesy of Jeju Air

Em­ploy­ees of Jeju Air pose for pho­to­graph.

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