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Jeju Air Suspends Eastar Jet Purchase

A Jeju Air 737-800 in Seoul (Photo: AirlineGeeks | Ben Suskind)

Jeju Air, the largest budget carrier in South Korea, suspended its purchase of Eastar Jet, another low-cost carrier in Korea, due to the latest financial situation.

According to Korean local media, Seok-Joo Lee, Chief Executive of Jeju Air stated if the current condition doesn’t improve, the industry leader would have to rely on debt to sustain.

Earlier, the airline recorded a net loss of 34.1 billion won ($29 million USD) from a profit of 70.88 billion won ($59 million USD), a previous year. In addition, the executives are willing to have a cut of 30 percent in their salaries. Lee sent out an email to its staff and mentioned the airline is in “crisis mode.” The staff have been asked to take two weeks or more of unpaid leave from March to June.

Since July, the travel demand has been declined in the wake of the tension between Japan and South Korea. “With competition with smaller rival getting tougher, the bottom line was affected by lower demand on Japanese routes due to local campaigns against Japanese products following Japan’s restriction of exports to South Korea since July,” the airline said in a statement

In the meantime, the demand to Hong Kong has been dropped since an eruption of the political crisis in the city.

The airline is now facing another setback. As a result of the Coronavirus outbreak in China, the airline has ceased seven routes to China since Jan 29. Also, the services from Seoul to Macau and Jeju to Hong Kong were scrapped recently. Jeju Air expected the weak demand in the first quarter of the year will remain.

According to its website, Jeju Air owns a fleet of 40 737 aircraft. It provides domestic routes and regional services, such as Japan, Taiwan, Hong Kong, and Guam. The airline was founded in 2005 and became the fastest-growing airline in the country.

This article was updated on Feb. 19, 2020 at 12:08 a.m. to correct a grammatical error involving the names of the carriers.

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