Due to sluggish demand for domestic flights and routes to Japan, which are the mainstay of low-cost carriers (LCC), expectations for performance in the third quarter of this year (July to September) are not high. However, there are recommendations to pay attention to potential performance differentiation among LCCs, indicating that profits may increase at different times.
Ahn Do-hyun, a researcher at Hana Securities, noted on the 5th through a report titled 'LCC: Profitability needs to be proven.'
According to the second quarter (April to June) data, the passenger volume for routes to Japan at Incheon International Airport increased by 8% compared to the same period last year, while the volume for Southeast Asian routes decreased by 9%. However, due to factors such as weather and earthquakes, there has been a slowdown in demand for the Japan route since June. Ahn noted, 'Since more than 60% of LCC revenue is generated from routes to Japan and Southeast Asia, it is necessary to lower the performance expectations for LCCs until the third quarter.'
The recovery of domestic routes from Muan International Airport has been sluggish since the tragedy involving Jeju Air. Ahn estimated, 'Since both the supply and demand of LCC domestic flights decreased by more than 10% compared to the same period last year after the tragedy, a similar trend is expected to continue until the second quarter.'
For China routes, passenger volumes have recovered to about 90% of 2019 levels. The recovery speed has accelerated due to the implementation of visa-free travel for Koreans to China. The issue is that the revenue share of LCCs from China routes is only 10%, and the number of routes they hold is limited. Ahn stated, 'The benefits from the China routes are bound to tilt towards larger airlines (FSC),' adding that 'among LCCs, Jeju Air has the highest exposure to the China routes.'
Ahn emphasized that in a market where the number of outbound travelers approaches 55% of the total population, it is important to identify the timing of individual corporations' profitability rebounds rather than just an increase in processed passenger volumes. He stated, 'Given the significant impact of the abnormal operating environment, LCC performance is expected to have 2025 as a low point, entering a profit growth trend from 2026,' suggesting that 'it is a time to closely watch JIN AIR, which is expected to stabilize its performance the fastest among LCCs and show integrated momentum.'