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Eastar Jet plans for 60 aircraft by 2025
June 28th 2019
IPO in 2020 will fund growth of current fleet of 23. Read More »
Eastar Jet’s plan for rapid growth could prompt a market share war as peer Korean LCCs seek to preserve the current hierarchy. Eastar has 23 aircraft but plans to expand to 60 by 2025 after completing an IPO in the second half of 2020.
Market leader Jeju Air operates 44 aircraft, further emphasising the significance of Eastar’s projected fleet of 60 aircraft. Jeju Air has not stated growth targets, but last year it placed an order for 40 737s and options for another 10. Delivery dates were not disclosed.
Jin Air and Air Busan operate 26 aircraft, which makes Eastar Korea’s fourth largest LCC. But after Jeju Air’s wide margin, Korea’s other LCCs are mostly of similar size. One or two strong years of growth could propel one LCC above the other, as has occurred in recent history. While Jeju Air has long been the leader, it has sought to widen the gap and reduce opportunities for a competitor to overtake it.
Eastar first flew in 2009. In a decade it has amassed an all-737 fleet of 23 aircraft. But in the next six years, it intends to more than double its fleet. Eastar is the only Korean LCC operating the 737-900, with two, although Air Busan and Air Seoul operate the Airbus equivalent, the A321. Eastar has two 737 MAX 8s that are parked.
Eastar CEO and president, Jong-Gu Choi, outlined to a CAPA conference in Cebu that Eastar’s fleet would increase to 25 aircraft in 2020, 30 in 2021 and jump to 60 in 2025, when it projects revenue to be two trillion won (US$1.7 billion).
The Korean LCC model has relied on cheap second-hand leased aircraft that delivered financial success and market expansion. But impressive passenger growth figures masks a significant business change in the sector as LCCs shift to new aircraft.
Highlighting this trend, Eastar said it would directly purchase aircraft. It aims for improved financials through sales and leaseback and gains from aircraft disposals.
Eastar said newer narrow body aircraft with longer-range could see it open theoretical services to Uzbekistan, Kazakhstan, Bhutan, India, Nepal, Singapore, Jakarta, Bali and Darwin. It is planning a Singapore service after it and Jeju Air received hard-won Busan-Singapore traffic rights.
Eastar has made other notable traffic right wins, including a recent allocation between Korea and China. Choi’s political background appears to have helped Eastar, which has sought to raise its government profile by operating various charters to Pyongyang. The strategy helped position Eastar as a facilitator of highly sought improved relations between North Korea and South Korea.
