Korean LCC Air Premia to spur growth through IPO, more aircraft

Air Premia Inc., a South Korean low-cost carrier (LCC) that was established in 2017 and started flight operations last July, is gearing for fast growth by expanding its international routes and pursuing an initial public offering.  

The newcomer in the aviation industry will raise capital via two rights offerings this year and increase the number of its large aircraft from the current five to nine by 2025, Chief Executive Officer Yoo Myung-sub said during an interview with The Korea Economic Daily on June 2.

The LCC aims to go public by 2026 and will further increase the number of large airplanes to 20 by 2030, the CEO added.

Yoo became the chief at Air Premia in November of 2021. He worked for 26 years at flagship carrier Korean Air Lines Co. and spent six years at Korea’s largest LCC Jeju Air Co., primarily focusing on sales and marketing in aviation businesses.

Air Premia began operating flights between Incheon and New York on May 22. The first flight to the US city posted an occupancy rate of more than 94%, and the following bookings for the same routes achieved 96% occupancy on average.

Unlike short-haul flights, long-haul travels have many variables in operations, Yoo said. The LCC will spur its long-haul businesses through price competitiveness, he added.      

The carrier’s economy seats are 35 inches wide, compared with an average of 29 inches for other domestic LCCs. The company focuses on lowering prices for quality services, the CEO said.

Air Premia forecasts 350 billion won ($267.7 million) in revenue and less than 10 billion of operating losses this year, primarily due to the introduction of four Boeing 787 Dreamliners. The company aims for more than 500 billion won in revenue and 20 billion won in operating profits.

The industry newcomer is garnering attention from the global aviation market as Korean Air strives to win approval from the US Department of Justice (DOJ) for merging with smaller domestic rival Asiana Airlines Inc. To address monopoly concerns, Korean Air has proposed handing some of its international routes to Air Premia.   

But the DOJ denied that proposal, saying Air Premia wouldn't be competitive enough to challenge the combined entity of Korean Air and Asiana, sources familiar with the matter told The Korea Economic Daily last month.

The DOJ and the European Commission (EC), which plan to deliver their verdict on Korean Air’s acquisition of Asiana on July 5, have negative views that a sole budget airline cannot stably manage operations of the routes handed over from the merger deal.

A possible scenario is that nine international routes from Asiana will be transferred to Air Premia and T'way Air Co. a local budget airline, sources said.

Air Premia is preparing strategies to gain approval from the global authorities, Yoo said.

Write to Hyung-Kyu Kim at khk@hankyung.com

Jihyun Kim edited this article.