"Can't Go to Southeast Asia Because of the Middle East War"...Fewer Flights, Higher Fares

[The Financial News] Domestic airlines are moving to protect profitability as they face a double blow of high oil prices and a strong dollar caused by the Middle East war. They are cutting flights and raising various charges, including fuel surcharges, in an effort to minimize losses. Not only smaller low-cost carriers (LCCs) but also major full-service airlines are now focused on defending their bottom line.
According to the airline industry on the 29th, five out of 11 Korean carriers have so far decided to reduce operations from April in order to ease the burden of jet fuel and other costs.
Five LCCs—Jin Air, Air Busan, Eastar Jet, Air Premia and Aero K Airlines—have confirmed partial suspensions on certain routes, while many of the remaining airlines are also considering cancellations.
Jin Air has decided to cancel a total of 45 flights between April 4 and 30 on several routes, including Incheon–Guam, Incheon–Clark, Incheon–Nha Trang and Busan–Cebu.
Air Premia, which mainly operates medium- and long-haul routes, will cancel a total of 50 flights in April and May on routes from Incheon to the Americas and Southeast Asia. The cuts include 26 flights on the Incheon–Los Angeles (LA) route, 8 on Incheon–San Francisco, 6 each on Incheon–Honolulu and Incheon–Bangkok, and 2 each on Incheon–New York City and Incheon–Washington, D.C.
Air Busan has also decided to cancel 14 round-trip flights on the Busan–Guam route, 4 round trips on Busan–Da Nang and 2 round trips on Busan–Cebu in April. Eastar Jet will suspend operations on the Incheon–Phu Quoc route from May 5 to 31, canceling more than 50 flights.
Aero K Airlines will partially suspend four international routes—Cheongju–Clark in April and Cheongju–Ibaraki Prefecture and Cheongju–Narita in June—and will cancel its Incheon–Osaka and Incheon–Ibaraki Prefecture services from August to October.
Vietnamese LCC VietJet Air has also sharply reduced flights next month on the Incheon–Phu Quoc, Incheon–Nha Trang, Incheon–Da Nang and Busan–Nha Trang routes, citing the burden of fuel costs and instability in jet fuel supply.
Industry observers say the recent surge in jet fuel prices this month is placing a heavy management burden on airlines. Routes with low load factors and weak profitability are being cut first, and the scale of reductions is gradually expanding. On Vietnam routes, local jet fuel suppliers have even notified Korean carriers that they will raise prices from next month, citing their own cost pressures.
Jet fuel is considered the most vulnerable petroleum product to supply chain shocks because it faces stricter quality standards than other refined products and is more prone to deterioration, making long-term storage difficult. According to analysis by global energy research firm S&P Global, as of the 27th the jet fuel price in Asia and Oceania stood at 533.32 cents per gallon, a 138% jump from 223.75 cents on the 27th of last month, just before the war.
Asiana Airlines and T’way Air, which recently entered emergency management mode, as well as other LCCs, are reviewing whether to suspend unprofitable routes. Korean Air has stated that it is not currently considering any route suspensions.
To offset the rising burden of operating costs, airlines will raise fuel surcharges on tickets by as much as threefold or more starting next month.
However, even higher fuel surcharges are not enough to fully cover losses from rising oil prices and exchange rates. One LCC, for example, expects its fuel costs this month to increase by about 102% from the previous month and around 110% from a year earlier, but the additional revenue from fuel surcharges is said to cover less than half of that increase.
Airlines also worry that higher ticket prices, once fuel surcharges are added, will dampen demand. As a stopgap measure, some carriers are running discount promotions to lower overall fares, thereby limiting the actual increase in ticket prices.
Some LCCs are also raising service fees to reduce transport cost burdens. T’way Air, the first airline to enter an emergency management regime, will broadly increase excess baggage charges on international routes starting on the 30th. T’way Air explained, "We have frozen our fees for the past three years to minimize the burden on customers," adding, "We were inevitably forced to adjust them in order to maintain stable service quality."
Aero K Airlines also raised a wide range of fees from the same day, including charges for pre-purchased baggage and premium seats.
With the war dragging on for more than a month, airlines with relatively weak crisis response capabilities are increasingly being pushed to the brink of survival, and calls for government-level support measures are growing within the industry.
Airlines have reportedly asked the Ministry of Land, Infrastructure and Transport for policy support to ensure stable jet fuel supply. They have also requested a deferral of the recovery of traffic rights and airport slots (takeoff and landing times). Under the Rules on the Allocation of International Air Transport Rights and Airspace Transit Rights, carriers that fail to use their traffic rights and airport slots above a certain threshold face their withdrawal the following year, in order to encourage continued route operations.
A Ministry of Land, Infrastructure and Transport (MOLIT) official said, "We have temporarily extended the deadline for airlines to comply with orders to improve their financial structure, and we are closely monitoring their business conditions, including jet fuel procurement," adding, "We are reviewing necessary support measures, including a possible deferral of traffic right and airport slot withdrawals, by revisiting tools used in the early days of COVID-19 such as the Key Industry Stabilization Fund."
Kim Kwang-ok, a professor in the Department of Aviation Management at Korea Aerospace University (KAU), noted, "For airlines that are vulnerable to external shocks, the management burden is growing, and there is a high possibility that initial cuts on international routes will spread to domestic routes in a 'domino-style' wave of reductions, which would also increase inconvenience for passengers." He added, "The government needs to flexibly ease the requirements for maintaining traffic rights and airport slots, and, if necessary, also consider policy support such as reducing tax burdens related to jet fuel."

chlee1@fnnews.com Lee Chang-hoon Reporter