Aju Business Daily

SEOUL -- South Korea's top budget carrier, Jeju Air, expressed a moratorium on the use of B737 MAX passenger jets until U.S. aircraft giant Boeing ensure the safety of its planes. In November last year, the carrier signed a $4.4 billion deal to buy 40 B737 MAX jets along with the optional purchase of 10 more. 

South Korea grounded two B737-Max 8s operated by Easter Jet, a budget carrier, and imposed a virtual ban on the flight of B737-Max 8s and Max 9s in its air space at least until Boeing takes action for safety. Korean Air, the top flag carrier in South Korea, and T’way Air, a budget carrier, will not put B737 Max 8s into service when they are delivered this year.

"In principle, we will not introduce this plane unless there is an international consensus about safety," Jeju Air CEO Lee Seok-joo told reporters on Thursday. "Since there is still time to spare, we will look closely at how the manufacturer responds. The delivery of ​B737-Max planes will begin in 2022.

Jeju Air, based on the southern resort island of Jeju, has made an aggressive investment to increase the size of its fleet and air routes. The low-cost carrier aims to reduce fuel costs, maintenance expenses and rental fees through the purchase of new planes. Currently, the carrier runs 38 B737-800s, including 35 chartered ones. Another B737-800 will arrive by the end of this year.

Lee said South Korea's low-cost carrier market would see a drop in profitability due to the entry of three more budget carriers -- Air Premia, Fly Gangwon and Aero K, which were licensed this month to launch services. South Korea has two full-service airlines, Korean Air and Asiana Airlines, and six low-cost carriers -- Jeju Air, Jin Air, T’way Air, Air Busan, Eastar Jet and Air Seoul.

The transport ministry has tightened licensing requirements for budget carriers, reflecting concerns about growing competition in South Korea's saturated low-cost carrier market and a price war. Budget carriers transported 29.2 percent of passengers on international routes last year.

Lee said the low-cost carrier market will be exposed to "multiple uncertainties". "Travel demand is still growing, but supply is expanding at a tremendous pace, and competition is growing," he said, expressing short-term concerns about profitability problems caused by competition"