Jeju air to add more Boeing planes as Asia demand boosts profits

Jeju Air Inc., a South Korean discount carrier, plans to expand its fleet with more Boeing Co. planes as the region's rising travel demand boosts the airline's operating profit.

Jeju Air plans to increase its fleet to 17 aircraft this year and 24 in 2016, Chief Executive Officer Choi Kyu Nam said in an interview today in Singapore. Operating profit is expected to rise 61 percent to 25 billion won ($23 million) this year from 15.5 billion won last year, he said.

The airline, which plans an initial public offering in the second half of next year, is adding planes as it seeks to carry as much as 25 percent more passengers and increase international flights, Choi said. A surge in air travel demand across Asia has prompted carriers in Vietnam, Malaysia and Indonesia to order hundreds of aircraft in recent years, boosting orders for Boeing and Airbus Group NV.

“We are trying to come up with products that will attract passengers to fly with us,” said Choi, whose airline offers a service that lets passengers request that seats next to them be blocked. “We need to differentiate ourselves because competition is increasing.”

Jeju Air flies to 10 international and four domestic destinations with 14 leased aircraft. The carrier plans to fly to Hanoi and Saipan this year and increase frequencies on routes to cities such as Hong Kong and Bangkok, Choi said.

The company also wants to offer more flights to China, adding to its services to the eastern cities of Weihai and Qingdao, the CEO said. Jeju Air plans to consider setting up a venture to offer medium- to long-haul services by the end of this decade, he said.

“We see big potential for travel demand in South Korea,” Choi said at a discount airline conference in Singapore.

The airline is working to get 20 percent of its sales from ancillary products in the next five years, compared with a target of 6 percent to 7 percent this year. It also plans to increase cargo carried in the bellies of its planes. Choi said total sales may increase to 530 billion won this year from about 440 billion won a year ago.

--Editors: Vipin V. Nair, Frank Longid

To contact the reporter on this story: Kyunghee Park in Singapore at kpark3bloomberg.net

To contact the editor responsible for this story: Anand Krishnamoorthy at anandkbloomberg.net