Jeju Air posts earnings surprise on business agility
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.
Employees of Jeju Air pose for photograph.