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JJA-2014-10 - TO SAIPAN
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JJA-2015-12 - Update-A.jpg
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JJA-AIRPORTS S KOREA - 2013-03
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Formed in 2005 and started operations in 2006. It was formed by a joint venture between the Aekyung Group and the Jeju Provincial Government. Domestic, regional, and international, scheduled & charter, passenger & cargo, jet airplane services.
Jeju City, South Korea
THE REPUBLIC OF KOREA (TAEHAN MIN-GUK) WAS ESTABLISHED IN 1948, IT COVERS AN AREA OF 99,016 SQ KM, ITS POPULATION IS 46 MILLION, ITS CAPITAL IS SEOUL, AND ITS OFFICIAL LANGUAGE IS KOREAN.
January 2005: Jeju Air (JJA) was established.
April 2005: $196 million 5/3 orders Bombardier Dash 8-Q400s.
June 2006: Received its Air Operators Certificate (AOC) and started operations.
August 2007: INCDT: (JJA) Dash 8-Q400 skidded off the runway at Gimhae International Airport, Busan, due to a strong headwind, resulting in 6 injuries to passengers and damaging the airplane, particularly the left propeller.
January 2008: Jeju Air (JJA) operates scheduled jet airplane services between Cheju and Pusan, Yangyang, and Seoul Kimpo International airports.
(IATA) Code: 7C. (ICAO) Code: JJA - (Callsign - JEJU AIR).
Parent organization/shareholders: Aekyung Group (75%); and Jeju Provincial Government (25%).
Main Base: Cheju International Airport (CJU).
Hub: Seoul Kimpo International airport (SEL).
Destinations: Pusan & Yangyang.
5 orders (February 2011) 737-800, at a list price of $363 million. Plans to add 15 737s to its fleet by 2013 to begin flights to China.
April 2008: 2 737-800s leased. Plans to lease +8 more by 2013.
June 2008: Plans to operate 8 charter flights between the New Kitakyushu Airport and Incheon International Airport, with a view to establishing regular scheduled flights.
July 2008: South Korean carrier Jeju Air (JJA) receives its 2nd 737-800 this month and it is looking to lease another 8 737-800s. (JJA) says the 737-800 will be used for scheduled domestic services as well as international charter services to Japan. The 2 737-800s are on lease from Macquarie AirFinance, said the source, who confirmed (JJA) is in the market for more. It also operates 4 Bombardier Dash 8-Q400s and already has 5 737-800s on firm order, but plans to have a fleet of 15 737-800s by 2013, says the source. This means it is looking to have 10 of the 15 737s on leases. The source says ideally it wants 6 to 7 year leases and for the airplanes to be in an all-economy (Y) configuration of 189Y passenger seats.
(JJA) has been operating charters to Fukuoka and Hiroshima in southern Japan on behalf of several South Korean travel agencies and it will soon be adding charters to the northern Japanese city of Sapporo. (JJA) hopes to eventually serve all of Japan’s major cities and by year-end be ready to launch services to a 2nd foreign country, either China or a nation in SE Asia.
(JJA) has been sending pilots (FC) to Alteon Training in the USA for 737 simulator training and the company has just bought a (CFM) International (CFM56) engine that will be delivered at the end of August and be used as a standby.
One of Jeju Air (JJA)’s strengths is its owners are the Jeju provincial government (25%) and South Korean conglomerate Aekyung Group (75%), so it is strong financially.
December 2008: Jeju Air (JJA) will launch 737-800 service from Incheon to Osaka (daily) and Kitakyushu (3x-weekly) on March 20, becoming the country's 1st Low Cost Carrier (LCC) to operate internationally, "The Korea Times" reported. (JJA) launched domestic flights in June 2006 and currently flies 2 737-800s and 4 Dash 8-Q400s. It plans to take delivery of 2 more 737s next year.
March 2009: Jeju Air (JJA) is based in Jeju, South Korea and operates scheduled domestic services between Jeju and the South Korea mainland.
(IATA) Code: 7C. (ICAO) Code: JJA (Callsign - JEJUAIR).
Parent organization/shareholders: Aekyung Group (75%); & the Jeju Provincial Government (25%).
Company slogan: "Join & Joy."
Domestic flights: Seoul (Gimpo) to Jeju; Cheongju to Jeju; and Busan to Jeju.
International flights (from March 2009): Seoul (Incheon to Kitakyushu; Seoul (Incheon) to Osaka.
April 2009: 737-86N (28628, HL7796), (LIFT) leased.
July 2009: (ST) Aerospace signed a 10-year, $45 million component maintenance-by-the-hour support agreement with Jeju Air (JJA) covering (JJA)'s 737NGs.
September 2009: 737-86J (30877, HL8206), delivery, ex-(D-ABAE).
February 2010: Honeywell (SGC) announced that Jeju Air (JJA) will replace the wheels and brakes on its 737s with Honeywell (SGC) wheels and steel brakes.
August 2010: Jeju Air (JJA) is about to add 2 more 737-800s on lease and launch new international services, now that it has sold its 4 Bombardier Dash 8-Q400s. The 4 Dash 8-Q400s, which (JJA) had grounded for over a year, have been sold to Colombian carrier Aires (AIR). The last Dash 8-Q400 left South Korea on the week of August 16.
Jeju Air (JJA) operates a fleet of 5 737-800s and has signed leases for 2 more 737-800s, he says. One of the airplanes is to be leased from Aviation Capital Group (CGP) and the other from European leasing company Oak Hill, says the official, adding that one is being delivered in October and the other in November.
(JJA) is primarily a domestic low-cost carrier (LCC) but it also has scheduled services to Nagoya, Osaka Kansai and Kitakyushu in Japan.
The official said on October 27 (JJA) is launching a 3x-weekly service from Seoul Incheon to Hong Kong and that same month, it is commencing Seoul Incheon to Manila services. He was unable to provide the details on the Manila service.
April 2012: Jeju Air (JJA) applied for flight rights to serve Guam from both Seoul Incheon and Busan using its 737-800s. Korean Air (KAL) already operates on both routes and its low-cost carrier (LCC) Jin Air (JIN) also operates between Incheon and Guam.
September 2012: Jeju Air (JJA) now serves Guam, a USA Trust territory popular with Asian tourists.
October 2012: Jeju Air (JJA) inaugurated services from Seoul Incheon (ICN) to Guam (GUM) in the western Pacific on September 27. Services on the 2,200 km route to Guam, which is 1 of only 5 USA overseas territories and host to a major military base, are now offered with daily frequencies using 737-800s. Last year, Korean tourists accounted for around 13% of the total number of Guam’s tourists and were the 2nd largest group after the Japanese. The Chairperson for Guam’s Committee on Tourism, Senator Tina Muña Barnes, who arrived on the inaugural flight from Seoul, said: “As we promote the growth and development of our tourism economy, opportunities like this help us expand and further diversify our market.” She then added: “Jeju Air (JJA) flights are a welcome addition, as they provide visitors with increased options and accessibility to Guam. This enhanced presence will further solidify our island as the premier visitor destination in the Asia-Pacific region.” Competition in the market from Seoul Incheon to the Pacific island comes from Korean Airlines (KAL)’s 2x-weekly and Jin Air (JIN)’s single weekly frequencies.
November 2012: Jeju Air (JJA) will operate Seoul Incheon service to Qingdao (daily), Osaka Kansai (daily), Hong Kong (daily), Guam (11x-weekly), Cebu (daily, through March 30), Nagoya (daily), Fukuoka (daily), Bangkok (daily), Manila (daily), Ho Chi Minh (daily); Gimpo service to Nagoya (daily); Busan service to Bangkok (daily), Hong Kong (3x-weekly through March 30); and Jeju service to Osaka Kansai (3x-weekly) for the winter season, which launched October 28.
According to the "Bangkok Post," (JJA), which is relatively independent compared to its competition, Air Busan (ABN), helped by Asiana (AAR), and Jin Air (JIN), helped by Korean Air (KAL), appears interested in linking up with a Low Cost Carrier (LCC) in Thailand. (JJA), which also competes with 2 other independent Korean (LCC)s: "T'way Airlines (TWY) and Eastar Jet (EJS), seems eager to expand to the (ASEAN) region, where many Koreans take holidays. Jeju (JJA) hired a Thai company to serve as its General Sales Agent (GSA) in the region. In addition to Bangkok, its other (ASEAN) destinations are Manila and Ho Chi Minh City.
April 2013: Jeju Air (JJA), Korea’s largest low-cost carrier (LCC), has signed a content agreement with Abacus International, giving Abacus-connected agents exclusive access to all of (JJA)’s flight schedules and fares by extending (JJA)’s service offerings to customers across Korea and the Asia-Pacific.
July 2013: Jeju Air (JJA) became the 4th South Korean airline to operate on the 1,300 km route from Seoul Incheon (ICN) to Tokyo Narita (NRT) on July 4th. Competing with Korean Air (KAL) (35x-weekly), Asiana Airlines (AAR) (27x-), Japan Airlines (JAL)/(JAS) (14x-), AirAsia Japan (WAJ) (7x-), Eastar Jet (EJS) (7x-) and United Airlines (UAL) (7x-), Jeju Air (JJA) offers 2x-daily 737-800 flights on the route.
August 2013: Jeju Air (JJA), a privately held, independent low cost carrier (LCC), said it managed a +$6 millionj net profit in the 1st 6 months of 2013, its best 1st-half result ever. According to the "Korea Economic Daily," (JJA) did get a boost from foreign exchange tailwinds.
Something is indeed going right, with revenues up a beefy +32% on a +23% rise in passenger traffic. Jeju Air (JJA), which operates 13
737-800s, flies from Seoul Incheon to a growing number of popular tourist destinations like Bangkok, Guam, Cebu, and Hong Kong. It also
serves Japan’s largest cities and is now expanding with particular zeal into China.
December 2013: (GE) Capital Aviation Services Limited (GECAS) (GEF) announced it signed a lease agreement with South Korean low-cost carrier (LCC) Jeju Air (JJA) for 2 737-800s. The 737-800s are scheduled for delivery in 2014 to expand (JJA)’s fleet.
Jeju Air (JJA) currently operates 13 737-800s, its 1st delivered in 2008. It maintains 3 domestic routes and 15 international routes. (JJA) has seen +30% annual passenger growth over the last 3 years.
June 2014: Korean domestic low-cost carriers (LCC)s are looking expand their long-haul operations in coming months. In response to increasing tourism figures and a relatively crowded local market, carriers such as Jin Air (JIN), Asiana Airlines (AAR) subsidiary, Air Busan (ABN) and Jeju Air (JJA) are all said to be eyeing the possibility of expanding into long-haul routes.
According to figures from the Ministry of Land, Infrastructure & Transport (MLIT), (LCC)s now account for nearly 40% of total domestic air traffic in Korea. This points to a significant slowdown in potential expansion from original rates of some 10% a year, when (LCC)s 1st launched in Korea.
Jin Air (JIN) (CEO) Ma Won confirmed (JIN) is planning to expand flights “beyond its current boundary of Phuket” in Thailand, and will look to other long-haul destinations including Hawaii, Australia, and possibly Europe. “The only way to achieve a breakthrough in growth is to offer long range flights that go beyond Phuket,” he said.
Air Busan (ABN) is already extending its reach with a deal offered through AirAsia (ASW), with flights from Kuala Lumpur to Jeju, using Air Busan (ABN) for the final Busan to Jeju leg.
Reports also indicate Jin Air (JIN) wants to add Airbus A330s or Boeing 777s to its fleet, to serve new long-haul destinations. Air Busan (ABN) is also investigating flying deeper into Asia, to Australia and possibly Turkey, where its links with Turkish Airlines (THY) via the Star (SAL) Alliance network would be an advantage.
737-86N (32694, HL8019), ex-(N839TM), (GEF) leased.
August 2014: Jeju Air (JJA), the independently-owned South Korean low cost carrier (LCC), has begun a weekly (Saturday) service between Seoul Incheon (ICN) and Jiamisu (JMU) in China. The 1,072 km route, which was launched on August 16, will be operated until October 25th with the airline’s 737-800s. This is (JJA)’s 3rd route to China as it already operates flights to Qingdao and Yantai from Seoul Incheon.
September 2014: Jeju Air (JJA) has added another Chinese destination from its international base at Seoul Incheon (ICN). On September 15th, (JJA) began 2x-weekly flights (Mondays and Fridays) on the 1,085 km route to Shijiazhuang (SJW) using its 737-800s. (JJA) already serves 3 other Chinese destinations; Jiamusi, Qingdao, and Yantai. This is Shijiazhuang’s 4th international destination after Hong Kong, Taichung, and Taipei Taoyuan.
October 2014: Jeju Air (JJA) continues to grow its international network from Seoul Incheon (ICN). On October 1st, (JJA), the Korean low cost carrier (LCC) began daily flights using its 737-800s on the 3,109 km sector to Saipan (SPN), the largest island of the North Mariana Islands, a commonwealth (US Trust Territories) of the USA in the western Pacific Ocean. (JJA) already serves Guam and is the only South Korean carrier to serve both airports. The 1st flight to Saipan reportedly carried 179 passengers.
SEE ATTACHED - - "JJA-2014-10 - TO SAIPAN."
Tourism plays a key role in the economy of Saipan, and Jeju Air (JJA)’s new daily service from Seoul Incheon is clearly targeting leisure traffic. The daily service will face competition from Asiana Airlines (AAR)’s 2x-daily flights.
December 2014: Jeju Air (JJA) has added another Japanese destination to its network with the launch on December 1st of daily flights on the 1,262km route from Seoul Incheon (ICN) to Okinawa (OKA). Okinawa Island is part of the Ryukyu Islands which stretch from the southern tip of the main Japanese island all the way down to Taiwan. (JJA)’s 737-800s will be used on the route which is also served by Jin Air (JIN) (12 weekly flights) and Asiana Airlines (AAR) (11 weekly flights). This winter, Jeju Air (JJA) will be serving 12 destinations non-stop from Seoul Incheon, all with daily or 2x-daily flights. Apart from Okinawa, (JJA) also serves the Japanese destinations of Fukuoka, Osaka Kansai and Tokyo Narita.
January 2015: South Korean low-cost carriers (LCCs) are ramping up international services to Guam, with 2 airlines launching routes from the southern city of Busan.
Jeju Air (JJA) introduced Busan to Guam flights January 8, while rival Air Busan (ABN) has asked the USA Department of Transportation for permission to operate the same route from June 30. The pair will be the only Korean (LCC)s to fly this route, although there is already a (LCC) service to Guam from South Korea’s largest gateway Seoul.
The Jeju Air (JJA) Busan to Guam flight will be 2x-weekly using Boeing 737-800s. This will complement the airline’s 2x-daily flights between Seoul Incheon and Guam. The (JJA) received approval to fly to USA destinations in 2012, at which time it expressed its intention to fly to Guam from both Busan and Seoul starting that year.
Air Busan (ABN) filed its application to serve USA destinations in December. (ABN) intends to offer 4x-weekly flights to Guam, using either Airbus A320s or A321s. Air Busan (ABN) said it may introduce service to Hawaii or even USA mainland destinations, and also asked for permission to operate charter flights to USA airports. So far, no comments have been filed regarding the application.
Air Busan (ABN) is a subsidiary of major Korean carrier, Asiana Airlines (AAR). It serves international destinations in Japan, greater China, including Hong Kong and Macau to Taiwan, the Philippines, and Cambodia.
Korean Air (KAL) also has a subsidiary (LCC), Jin Air (JIN). The (LCC) has flights from Seoul Incheon to Guam, and the parent airline serves Guam from both Incheon and Busan.
February 2015: News Item A-1: Jeju Air (JJA) has started its 1st route to Beijing (PEK) with the launch on February 13th of 3x-weekly (Mondays, Wednesdays and Fridays) flights from Daegu (TAE). The 1,156 Km route will be operated by (JJA)’s 737-800s and will face direct competition from Air China (BEJ)’s 2x-weekly flights. (JJA) already operates 2x-daily domestic flights from Daegu to Jeju, and will be adding 2x-weekly Bangkok flights from the beginning on March.
News Item A-2: 737-8GJ (CFM56-7B) 37361, HL8031), ex-(N374DC), Babcock & Brown (Fly Leasing) (BBB) leased.
March 2015: News Item A-1: Jeju Air (JJA) has begun 2x-weekly (Thursdays and Sundays) service from Daegu (TAE) in South Korea to Bangkok Suvarnabhumi (BKK). Operations on the 3,711 km route began on March 1st and will be flown by (JJA)’s 737-800s. Jeju Air (JJA) already serves Bangkok from Seoul Incheon (2x-daily) and Busan (daily). From Daegu, (JJA) already serves Jeju (2x-daily) and Beijing (3x-weekly). Last year, Daegu Airport handled 1.54 million passengers.
News Item A-2: Singapore flag carrier, Singapore Airlines (SIA) has been in talks to buy around 20% of Korean low-cost carrier (LCC), Jeju Air (JJA) in the lead up to its initial public offering (IPO) later this year.
In a statement to the Singapore Stock Exchange, (SIA) confirmed “that discussions have taken place on a possible equity investment in Jeju Air (JJA).” (SIA) added that further public announcements could be on the way.
The deal would give the (SIA) Group considerably more access to the expanding Korea to China market, where full-service carriers are seeing high levels of competition from other (LCC)s such as Air Busan (ABN), Eastar (EJS), Jin Air (JIN), and T’Way (TWY).
The 2 countries have seen a huge surge in tourist passengers with South Korea becoming China’s 3rd most popular destination with >6.1 million passengers in 2014, a +41% increase over 2013. Korea provided 4.2 million visitors to China in 2014, up +5.4% from 2013.
However, (SIA)’s links to the still-expanding Korean market are currently not strong, with Scoot (SCT) currently as its only link into the (LCC) market in the country. Locally, Korean (LCC)s have captured >50% of the local market from legacy airlines in the last decade.
(SIA) started talks to buy into Jeju Air (JJA) with its parent Aekyung Group late last year, prior to the (LCC)’s plans to go for a (Q4) 2015 (IPO) to raise KRW200 billion/$180 million for expansion of its fleet and network, principally deeper into China’s 2nd tier cities.
Late last month, Jeju Air (JJA) introduced a new 3x-weekly, Daegu to Beijing service using Boeing 737-800 airplanes.
May 2015: News Item A-1: "Korean Transport Ministry is Pushing for Aircraft Age Limit" by Jeremy Torr, Air Transport World (ATW), May 22, 2015.
Korea’s Ministry of Land, Infrastructure, & Transport (MLIT) is urging all Korean airplane operators to replace or mothball all airplanes that are more than two decades old.
The (MLIT) said that 8 of the country’s carriers had signed a Memo of Understanding (MOU) in which they “voluntarily agreed to replace all their airplanes that are 20 years old or older.” The move comes following a spate of airplane maintenance issues in the region.
In April, Japan and Korea suspended charter flights from Thailand following an (ICAO) inspection, and 2 air operator’s certificates (AOCs) in the Philippines were withdrawn recently following a European Aviation Safety Agency (EASA) audit.
To date, Korean Air (KAL), Asiana Airlines (AAR), Air Busan (ABN), Jeju Air (JJA), Jin Air (JIN), Air Incheon (ICH), Eastar Jet (EJS), and T’way Air (TWY) have all agreed to the 20-year ruling.
The (MLIT) said the agreement was part of Korea’s “ongoing efforts to improve on airline safety.” The (MLIT) said records indicate that of 264 airplanes in service this month, some 14 are (MLIT)’s new voluntary age limit. These are 4 Korean Air (KAL) 747-400s, Air Incheon (ICH) 737-400Fs, and Asiana (AAR) 767-300 and 747-400F cargo airplanes. (KAL)’s average airplane age is 9.89 years; No 2 carrier, Asiana Airlines (AAR), has an average airplane age of 8.47 years, according to the Ministry.
Compared to the USA, Korean fleets are mere toddlers, the (MLIT) said, citing Delta Air Lines (DAL)’s fleet that has 234 airplanes 20+ years old, and American Airlines (AAL)’s fleet, which has 233+ airplanes of that age or more.
Although the (MLIT) noted that “there currently is no limit on the age or lifespan of an airplane,” it said the move would help improve both overall safety and efficiency.
August 2015: News Item A-1: Singapore Airlines (SIA) said that after nearly 6 months, talks concerning the possible acquisition of a stake in Jeju Air (JJA) have come to an end with no deal signed.
"Singapore Airlines (SIA) wishes to announce that discussions have now ceased and the parties will not be proceeding with a transaction," (SIA) said in a filing to the Singapore stock exchange.
Singapore Airlines (SIA) maintains stakes in several Asia-Pacific operations including Vistara (VST) in India and Virgin Australia (VOZ), as well as in NokScoot (NSC) via its Scoot (SCT) subsidiary.
News Item A-2: Jeju Air ((IATA) Code: 7C, based at Jeju) (JJA) said it is considering re-branding itself as "AK Jeju Air" ahead of a planned Initial Public Offering (IPO) on the South Korean bourse later this year.
Announcing a record profit of +KRW32.3 billion/+USD29.4 million for the 1st half of 2015, the budget carrier said aligning its name more closely with that of parent, the Aekyung Group (AK), may help increase the likelihood of a strong public debut. Shareholders will vote on the name change during an extraordinary meeting next month.
Jeju Air (JJA) plans to raise KRW200 billion/USD176 million through the sale of a 20 to 30% stake, in a move that will make it the 1st publicly-listed South Korean budget carrier.
Funds raised will be used to grow (JJA)'s Chinese business through improved direct marketing and sales starting in Beijing.
(JJA) currently operates 20 airplanes to 10 countries, to 24 destinations on 30 routes and 129 daily flights.
October 2015: Korean low-cost carrier (LCC) Jeju Air (JJA) will rebrand its operations prior to launching an initial public offering (IPO) by year end. It plans to issue 5.5 million shares on the Korea Exchange to raise at least KRW126.5 trillion/$107 million. (JJA) said the money will be used to add cash reserves to help it capitalize on the rising numbers of Chinese tourists visiting Korea. Launching an (IPO) has been on the table since 2013.
(JJA) had been in talks with Singapore Airlines (SIA) earlier this year for a stake in the Korean (LCC). However, earlier this month (SIA) decided not to go ahead with the equity deal, prompting a reassessment of the (IPO) option.
After (JJA)’s rebranding, it will be renamed "AK Jeju Air," emphasizing the carrier’s relationship to its parent company, the Aekyung Group. The new branding (which will be applied to airplanes, facilities and all consumer touchpoints) is designed to reflect the character of Jeju Island where (JJA) has its base.
Preliminary approval for the (IPO) has been given, although reports indicate the Jeju Special Self-Governing Province, which owns 4.54% minority stake in the airline, is not a key supporter of the move.
(JJA) has a 20-strong fleet of 737 airplanes, flying to 18 international destinations in 9 countries, as well as 6 domestic destinations in Korea. It plans to add new services to Okinawa, Da Nang, Vietnam, and Osaka, Japan before the end of 2015.
December 2015: News Item A-1: Jeju Air (JJA), which recently unveiled a new corporate identity, has become the 4th Korean carrier to offer services between Seoul Incheon (ICN) and Da Nang (DAD) in Vietnam. On December 2, the Low Cost Carrier (LCC) began a daily service on the 2,980 km route joining Asiana Airlines (AAR), Jin Air (JIN), Korean Air (KAL) and Vietnam Airlines (VIE), who all operate daily flights between the 2 cities. (JJA) already serves Hanoi in Vietnam, a route it launched just <1 year ago on December 18 2014. Between 2012 and 2013, (JJA) also served Ho Chi Minh City.
News Item A-2: See attached - "JJA-2015-12 - Update-A/B/C/D/E/F/G."
February 2016: "Korea to Overhaul (LCC) Safety Guidelines" by (ATW) Jeremy Torr, February 2, 2016.
The South Korean Ministry of Land, Infrastructure & Transport (MLIT) has outlined a set of new safety guidelines requiring all low-cost carriers (LCCs) to employ 6 sets of pilots (FC) and 12 type-certified mechanics (MT) for each of the aircraft in its fleet.
Additionally, all Korean (LCC)s will be required to have one fully operational airplanes available for use as a substitute in the event of mechanical issues prejudicing safety on a scheduled service.
Korean Yonhap news agency has reported the new guidelines follow 2 recent safety-related incidents involving Korean (LCC) aircraft: In December 2015, a Jeju Air (JJA) pilot (FC) failed to turn on the cabin air supply, and in January 2016 a Jin Air (JIN) flight took off with an improperly closed door.
The (MLIT) said the new rules are designed to “fundamentally overhaul the way low-cost carriers (LCCs) run their operations” and would be enforced with penalties for noncompliance. The move comes as part of a wider safety push by Korean aviation authorities, including a plan to mothball old aircraft for safety reasons. Although the new rules would not be legally enforceable, the (MLIT) said it would impose permit restrictions on offending carriers. It noted that contraventions of the new regulations could result in flight schedule suspensions, cuts in designated routes, and a loss of priority in future slot allocations at relevant airports.
June 2016: "Value Alliance: the Hubs, Focus Airports and Routes Where Alliance Members Might Gain Synergies" by (CAPA), June 20, 2016.
Since the Value Alliance was announced in May 2016 as the 2nd low cost carrier (LCC) alliance, there has been industry interest about how and where the alliance can deliver synergies. The 9 initial members of the Value Alliance include Cebu Pacific (CEB), Cebgo (SRQ), Jeju Air (JJA), Nok Air (NKA), NokScoot (NSC), Scoot (SCT), Tigerair Singapore (TGR), Tigerair Australia (TAU) and Vanilla Air (VNL).
Tokyo Narita is the alliance hub with more service from Value members (5) than any other. But Asia's most popular airports for Value members are not where the alliance has a local member: Taipei and Hong Kong. In terms of frequency, Manila and Bangkok Don Mueang have the most Value flights, reflecting their local membership there. The local Value member based at an airport typically dominates the hub, accounting for >90% of Value flights. That creates a strong feed network for other members but also (potentially) competition that may be too strong. Members overlap on only 6 routes so far and their combined frequency gives them a scale advantage against non-Value (LCC)s. Although it is premature to evaluate the effectiveness of the alliance (new members will join and existing members will grow) this analysis looks at where there are network opportunities for cooperation.
* Airports most frequented by Value Alliance are not member hubs.
There are services from 3 or more members of the Value Alliance at 15 airports in Asia. This includes Tigerair (TGR) and Scoot (SCT), which have the same ownership, but excludes Cebu (CEB) and Cebgo (SRQ), since (CEB) owns (SRQ). (TGR) and (SCT) are expected to merge, with only 1 brand surviving.
5 airports have services from 4 or more alliance members. The 2 most popular airports (Taipei Taoyuan (6) and Hong Kong (5)) are not local hubs for the Value Alliance. 3 airports have services from 4 Value members: Hanoi, Osaka Kansai, and Tokyo Narita. Only Tokyo Narita is a Value hub (served by Vanilla Air (VNL)), although Osaka Kansai is a growing focal point for (VNL) and in time, will likely become a hub.
Taipei is home to 2 (LCC)s: Tigerair Taiwan (TTW) and V Air (VAX) (but neither is a member of Value (or of U-FLY)). (TTW) is 10% owned by the Tigerair Holdings but is not a member, and is expected to be wholly under control of the China Airlines (BEJ) Group, once the expected Tigerair (TGR)/Scoot (SCT) merger occurs. V Air (VAX) is owned by TransAsia (FSH) and has no partnership affiliations. TransAsia (FSH), a full service regional airline, is not a member of a global alliance.
It is not without coincidence that the most commonly served airports are in NE Asia. Taipei and Hong Kong are accessible from both SE Asia and NE Asia with narrow body airplanes, making the 2 airports accessible for all members. Only Jin Air (JIN) (not an alliance member) is a NE Asian wide body (LCC) operator, so NE Asia’s (LCC)s are restricted from flying deep into SE Asia.
In contrast, SE Asia has 2 wide body (LCC) operators that belong to an alliance: Scoot (SCT), NokScoot (NSC) and Cebu (CEB). Cebu (CEB) can access NE Asia with narrow body aircraft, although it sometimes uses wide body aircraft on trunk/congested routes. There are services from 3 Value members at 10 airports, and all but 3 are Value member hubs.
* Measured by frequency, most services are at Value alliance member hubs.
This analysis next looks at the largest airports in the Value Alliance based on weekly frequencies. This analysis comprises the 21 largest airports (the 20th and 21st largest have the same number of frequencies). The 6 largest airports are all member hubs.
The 4 largest (Manila, Bangkok (DMK), Singapore, and Cebu) are significantly larger than the rest. Of the 10 largest airports based on member frequency, only 2 (Hong Kong and Taipei Taoyuan) are not member hubs.
* Largest Value Alliance airports are dominated by their members.
13 of the region's largest airports have >7 daily flights from alliance members. Each is dominated by its local alliance member. At the 2 largest (Manila and Bangkok (DMK)) the local alliance hub member operates 98% and 94% of all flights by the alliance. In other words, of all Value flights at Manila, Cebu (CEB) operates 98% at Manila, while NokScoot (NSC) and Nok (NKA) operate 94% of all Value flights at Bangkok (DMK).
A Value Alliance Member typically accounts for >90% of alliance flights at its home. 4 airports are around the 80% mark, while there is no Value Alliance member operating flights at Bangkok (BKK) (they instead operate out of Bangkok (DMK)).
* Value Alliance members overlap on 6 routes.
There is a possibility that the Value Alliance could help (LCC)s gain scale on routes, especially where due to infrastructure constraints (slots, air traffic, bilaterals) organic growth may not be an option.
In the week commencing June 12, 2016 the Value Alliance members overlap on only 6 routes. This excludes overlap only between Scoot (SCT)/Tigerair (TGR) (owned by the same company and expected to be merged) and Cebu (CEB)/Cebgo (SRQ) (Cebu (CEB) owns Cebgo (SRQ)). (CEB) has the most overlap (4 routes) followed by Jeju (JJA) (3), Tigerair (TGR) and Scoot (SCT) (2) and then Vanilla Air (VNL) (1).
No route has >2 operators. The frequency split varies between relatively even and lopsided. As this analysis is focused on the opportunity to offer more flights, frequency (not seats) is considered. The use of wide bodies at Scoot (SCT), and sometimes Cebu (CEB), would alter a capacity share analysis.
* Value Alliance opportunity to link NE Asia with SE Asia.
The geography of east Asia means that (LCC)s cannot serve the entire region with existing narrow body technology, although (LCC)s in some markets can come close. The final analysis in this report considers the ability of the Value Alliance to link NE Asia with SE Asia, and vice versa.
6 of the members have routes between NE and SE Asia. Vanilla Air (VNL) operates wholly within NE Asia but is examining a Taipei base to use 5th freedom rights to fly to SE Asia. Cebu Pacific (CEB) has the greatest number of flights between NE and SE Asia. This is probably unsurprising given the Philippines' geographical position, which is more between the regions. Tigerair (TGR) and Scoot (SCT) have approximately 10 routes between the regions.
Evaluating the opportunity is complex: routes are often to points where there is no service from another Value member, or there is limited frequency, and it may not enable a same-day connection, or a connection within reason. Some connections would be circuitous. But as noted earlier, it is too soon to evaluate the opportunity for the alliance.
* Outlook: long haul operator, member with central geography, could bring opportunity but also competition.
The Value Alliance faces the same conundrum as full service alliances: adding members brings opportunities but also competition. A member that is more central between the regions (such as in Hong Kong or Taiwan) could enable more links and connection opportunities.
Alternatively, that member may prefer to serve points on its own. (As (CAPA) has previously recorded, some Value members are expected to work with HK Express outside the (LCC) alliance organizations). More long haul operations could mean that an airline gains access to the strong regional hub of a partner in a different part of Asia. Alternatively, this could preclude cooperation between other members.
The opportunities for the Value members today are varied, but they do exist. With time, the synergies within the alliance should become greater. Most critically, this is all being developed with minimal cost, unlike the high joining and membership fees of full service alliances. While the gains may not seem as significant, neither are the costs.
Conclusion: As (CAPA) has previously concluded of the alliance:
* Joining the Value Alliance should be an appealing option for Asia’s independent (LCC)s since the cost and risk of membership are small. At the May 16, 2016 launch event, executives representing the founding members stressed that the concept is to add incremental passengers without incurring additional cost or adding any complexities. The members said that they would not have joined, if they had not been able to retain their business models.
* The main objective is for each member to increase their brand awareness across Asia-Pacific. The main objective is for each member to increase their brand awareness across Asia-Pacific and augment their distribution network through cross-selling. The alliance members pointed out that most of their brands are not well known outside their respective home markets.
* The members expect that the alliance will only generate a small increase in their interline traffic volumes (at least in the initial phase).
* Interline traffic for most members is a very small part of their overall business (for some it has even been non-existent) and most members do not expect that interline traffic will ever account for a large share of their overall traffic.
* The Value Alliance essentially offers its members a nothing-to-lose alternative for attempting to increase transit traffic and attract passengers in new markets who are now flying with other airlines. Even if the alliance only brings each member a +1% incremental gain in passenger traffic, it can be deemed a success, given the limited cost and the simplicity of the new offering.
* Asia’s independent (LCC)s need to evolve and embrace new alternatives if they are to maintain their growth trajectory and succeed in an increasingly competitive marketplace.
January 2017: Boeing (TBC) confirmed January 10 that South Korean low-cost carrier (LCC) Jeju Air (JJA) is the previously unidentified customer behind a December 2016 order for 3 737-800NGs, valued at $288 million at current prices. It is (JJA)’s 1st direct-purchase order with Boeing. (JJA) operates an all-leased fleet of 26 737-800NGs.
“This acquisition is a major step in our growth strategy [and will] further strengthen our position as a leading (LCC) in NE Asia,” Jeju Air (JJA) (CEO) Ken Choi said.
(JJA) was established in 2005 as Korea’s 1st (LCC), with operations beginning in 2006. (JJA) operates 40 domestic and international routes with approximately 150 daily flights.
The 737-800NG seats 162 to 189Y passengers and has a range of 5,700 nm.
February 2017: 737-8AS (37541, HL8088), ex-(EI-EFR), leased from (SMBC) Aviation Capital (SBC).
March 2017: 737-8AS (37540, HL8090), ex-(EI-EFP), leased from (SMBC) Aviation Capital (SBC).
Click below for photos:
JJA-737-800 - 2013-12
JJA-737-800 - 2015-01
JJA-737-800 - 2015-08.jpg
JJA-737-800NG - 2016-12.jpg
JJA-737-8AS EI-DYH 2015-10.jpg
3 737-8AS (CFM56-7B27) (36570, EI-DYH; 2574-36571, /08 HL-8050; 37540, HL8090), EX-(EI-DYH), EX-RYANAIR (RYR) 2015-12 & 2017-02. WITH WINGLETS. 190Y.
1 737-8AS (CFM56-7B27) (37541, HL8088), EX-(EI-EFR), (SMBC) AVIATION CAPITAL (SBC) LEASED. WITH WINGLETS. 190Y.
2 737-8BK (CFM56-7B24) (1108-30622, /02 HL8260; 1193-30624, /02 HL8261), EX-(VH-VOB; & VH-VOD), 2012-09. WITH WINGLETS. 190Y.
1 737-8GJ (CFM56-7B) (37361, HL8031), EX-(N374DC), FLY LEASING (BBB)LSD 2015-02. 190Y.
1 737-8Q8 (CFM56-7B26) (78-28214, /98 HL8262), EX-(N225LF) 2012-03. WITH WINGLETS. 190Y.
2 737-800 (CFM56-7B), (GEF) LEASED, 2014-06.
3 ORDERS 737-800NG (CFM56-7B), (TBC) ORDER 2016-12:
2 737-82R (CFM56-7B26) (849-29344, /01 HL-8239, 1325-30658, /03 HL8263)), EX-(TC-APU) 2011-06 & (VH-VOV) 2012-11. WITH WINGLETS. 190Y.
2 737-85F (CFM56-7B-26) (180-28824, /98 HL7779; 467-28827, /99 HL7780), MACQUARIE AIRCRAFT LEASED 2008-07. 189Y.
1 737-86J (CFM56-7B-27) (782-30877, /01 HL8206), EX-(D-ABAE) 2009-09.
10 737-86N (CFM56-7B-27) (410-28608, /99 HL8214; 573-28628, /00 HL7796, 2009-04; 32694, HL8019)), LIFT LEASED, 189Y.
1 737-86Q (CFM56-7B) (30285, HL8234), (ALE) LEASED 2011-10.
0 BOMBARDIER DASH 8-Q402 (PW150A) (4119, /96 HL5251; 4124, /06 HL5252; 4129, /06 HL5254; 4137, /06 HL5255; 4141, /06 HL5256), ALL 4 SOLD 2010-08 TO (AIR). 78Y.
Click below for photos:
JJA-1-KEN CHOI - 2013-08
KEN CHOI, CHIEF EXECUTIVE OFFICER (CEO).
KO YOUNG-SUP, PRESIDENT.
T S KANG, PROJECT MANAGER.