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INTERVIEW-S.Korea's Jeju Air plans Q4 IPO, targets threefold sales growth by 2020
March 12, 2015 / 6:42 AM / 3 years ago

INTERVIEW-S.Korea's Jeju Air plans Q4 IPO, targets threefold sales growth by 2020

* IPO could value company at top of analysts’ forecasts

* Will become first listed budget airline in S.Korea

* Targeting 1.5 trln won sales in 2020 vs 511 bln last yr

* Wants ‘larger voice’ on China traffic rights - CFO

By Joyce Lee

SEOUL, March 12 (Reuters) - Leading South Korean budget airline Jeju Air Co hopes Chinese and other Northeast Asian travellers will drive a threefold leap in sales over the next six years, as it prepares to become the first listed Korean low-cost carrier with a fourth-quarter IPO.

Some Jeju-watchers believe the initial public offering - in which it plans to float 20 percent to 30 percent of its shares including new issues - will value the carrier at about 700 billion won ($617.77 million), at the top of the 450-700 billion won most analysts currently predict.

Forecasts are being revised upwards thanks to Jeju’s strong recent revenue growth averaging 34 percent a year since 2010, and its snatching of market share from full-service carriers Korean Air Lines and Asiana Airlines.

“Korean LCCs (low-cost carriers) have a market share of about 14 percent of international flights which we believe will approach the much higher LCC share seen in Southeast Asia as the market matures,” Jeju Air Chief Financial Officer Kim Tae-yoon said in an interview with Reuters.

Kim said the company targeted sales of 1.5 trillion won in 2020 from 510.6 billion won last year, with 40 jets and 60 routes. It also expected to expand into the long-haul business and wide-body planes around the end of the decade. It currently long-leases its 17 Boeing 737s.

Ten-year-old Jeju is going hard after Chinese tourists, offering popular liquors and cosmetics onboard to lure mainlanders to its home base of Jeju island. The resort island hosts seven foreigner-only casinos, a key drawcard as Chinese gamblers flee Macau amid a corruption crackdown.

Chinese tourist arrivals to South Korea surged almost 41 percent last year to 6.13 million, a business dominated by Korean Air and Asiana thanks to their control of the Korean portion of regular routes under constrained “open skies” agreements between the two countries.

But Jeju intends to use the IPO funds to grow its China business, including direct marketing and sales starting in Beijing - which it began servicing regularly in February.

“Full-service carriers have been trying to keep us in check since the beginning. If we have a larger market share, we’ll have a larger voice whenever traffic rights are assigned,” Kim said.

Jeju expected to lift its 6 percent market share in international flights to and from South Korea to more than 10 percent by 2020, Kim said.

“Jeju Air is expected to make about 40 billion won in net profits this year, meaning its market capitalisation will be around 700-800 billion won in the initial public offering,” Hyundai Securities analyst Yong Jun said.

Jeju Air is majority owned by mid-tier conglomerate Aekyung Group.

$1 = 1,133.1100 won Editing by Stephen Coates

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