T'way Air, a low-cost carrier (LCC) in Korea, is on emergency footing to defend its results. As it expanded long-haul routes to Europe and elsewhere, its financial burden grew, and with the recent war involving the United States, Israel, and Iran sending oil prices and exchange rates soaring, the company faces a sharp deterioration in profitability.
According to the aviation industry on the 23rd, the price of jet fuel traded in Asia and Oceania was 414.75 cents per gallon this month, up 99.5% from a year earlier. The won-dollar exchange rate topped 1,500 won as of the day.
In response, unlike other LCCs, T'way Air, which is burdened by the expansion of new long-haul routes, implemented an emergency management system on the 16th. T'way Air's financial structure is worse than other LCCs, and the company said it would respond preemptively to improve it.
T'way Air's liability ratio began to rise as it started sequential service on European routes in 2024, and as of the end of last year it reached 3,483%, the highest among major LCCs. During the same period, Jeju Air's liability ratio was 754%, Jin Air's 423%, and AIR BUSAN's 801%, all far lower than T'way Air's.
T'way Air has posted losses consistently since the second quarter of 2024, and as of the second quarter last year, total equity turned negative (-), pushing the company into complete capital erosion. It subsequently injected capital through back-to-back rights offerings, but with losses continuing, concerns over its financial structure are mounting.
T'way Air launched a large rights offering for existing shareholders on the 16th, but it fell short due to weak demand. Of the 76.98 million shares on offer to existing shareholders, 64.61 million were subscribed, for a total subscription rate of 83.93%.
In financial markets, many say T'way Air failed to draw strong demand for the rights offering because the burden of operating long-haul routes makes it unlikely to improve results. Korea Investment & Securities Co. forecast that T'way Air will post an operating loss of 78 billion won this year, marking its third straight annual loss.
An aviation industry official said, "European routes require much more fuel than routes to Japan or China, so they inevitably bear significant impact from the recent surge in oil prices and the rise in exchange rates." The official added, "In particular, European routes have large seasonal swings in demand and carry heavy burdens in operating expense," and said, "Compared with other LCCs, T'way Air will face particularly tough challenges."
Meanwhile, other LCCs, taking into account multiple external variables, have already been streamlining fleet operations this year by expanding service on routes to Japan and China.
Jeju Air increased its Incheon–Yanji route from three to six weekly flights in January and also added frequencies on routes such as Incheon–Weihai and Guilin. Jin Air launched new service on the Busan–Taichung and Busan–Miyakojima routes and the Jeju–Hong Kong route, while Air Premia increased the Incheon–Narita route to 10 weekly flights. Eastar Jet Co. launched new service on the Incheon–Hong Kong route.