Jeju Air acquires majority stake in Eastar Jet

A Jeju Air Boeing 737-800. Photo: © Alan Wilson

The largest South Korean low-cost airline; Jeju Air, has completed a long anticipated majority purchase of the competing low-cost carrier Easter Jet.

Jeju Air has acquired a 51%-stake in Eastar Jet, valued at US $45.5 million. Previously, Jeju Air had initially agreed to purchase the stake for about US $52,8 million. This price reduction is likely tied to a sharp decrease in demand in the region after the recent outbreak of the Wuhan-originated Coronavirus is keeping many people away from travelling. As of Monday, South Korea has the largest number of formally reported infections outside China.

This latest development is part of ongoing troubles in South Korean aviation market which has been struggling with overcapacity even before the recent virus outbreak began impacting air travel. As a result of the current situation, many Korean airlines have announced drastic network reductions and terminated many flights to various destinations for reasons related to Coronavirus – most notably a drop in new bookings.

Commenting on the acquisition, Jeju Air Chairman Lee Seok-joo stated that “[…] the domestic airline industry, which has a structural problem of oversupply, will soon have to restructure […]” and further indicating that his airline wanted to be ahead of its competitors when it’s time for consolidation.

The fleets of the two carriers consist exclusively of Boeing 737 aircraft with Jeju Air operating 46 737-800 and Eastar Jet operating 19 737-800, two 737-900 and two currently grounded Boeing 737 MAX 8, of which it has four more on order. Jeju Air also has another 40 Boeing 737 MAX 8 on order.