In a statement to the Singapore Stock Exchange, SIA confirmed “that discussions have taken place on a possible equity investment in [Jeju Air].” SIA added that further public announcements could be on the way.
The deal would give SIA Group considerably more access to the expanding Korea-China market, where full-service carriers are seeing high levels of competition from other LCCs such as Air Busan, Eastar, Jin Air and T’Way.
The two countries have seen a huge surge in tourist passengers with South Korea becoming China’s third most popular destination with more than 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 currently as its only link into the LCC market in the country. Locally, Korean LCCs have captured over 50% of the local market from legacy airlines in the last decade.
SIA started talks to buy into Jeju Air 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 second tier cities.
Late last month, Jeju Air introduced a new 3X-weekly Daegu-Beijing service using Boeing 737-800 aircraft.
(Jeremy Torr - ATWOnline News)
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