Amid growing concerns over Jeju Air’s liquidity following a surge in booking cancellations after the Muan Airport tragedy, the airline dismissed such worries, asserting that there will be no issues with liquidity.
“The number of cancellations since the incident has clearly been higher than before, but new bookings continue, although at a reduced rate,” said Song Kyung-hoon, head of Jeju Air’s management support division, during a press briefing held in western Seoul on Thursday.
Song also said that the airline’s large-scale investment plans are expected to “proceed without delay” as the costs for new aircraft acquisitions have already been prepaid.
However, industry experts speculate that Jeju Air will face increased pressure on cash flows due to refund payments and the impact of a potential boycott.
As of Thursday, Jeju Air’s advance receipts amounted to 260.6 billion won ($196 million), the largest among domestic low-cost carriers, according to regulatory filings. This is 41.6 percent higher than the 184.3 billion won held by the nation’s No. 2 LCC, T’way Air. Most of the amount consists of ticket payments collected during reservations.
On Sunday and Monday, some 68,000 Jeju Air flight cancellations were reported, with the majority occurring after 9 a.m. on Sunday, when the disaster took place.
Jeju Air officially said it would offer full refunds for all reservations made through Sunday and waive cancellation fees for all routes. Since the company is required to issue full cash refunds without any cancellation fees or voucher replacements, this is expected to put further stress on its cash flows.
Jeju Air’s financial stability was already under strain.
As of the end of the third quarter last year, the company’s liquidity ratio stood at 39.4 percent, well below the 150 percent level that is considered acceptable.
While operating cash flow for the third quarter of 2024 showed a net inflow of 93.9 billion won, this represents a 68.9 percent decrease from the 301.6 billion won recorded during the same period the year before.
Since Thursday morning, police have been conducting searches at Jeju Air’s Seoul office, the Muan Airport authority office and the Busan Regional Aviation Office’s Muan branch. Song said that Jeju Air will fully cooperate with the ongoing investigations.
By Kim Hae-yeon ([email protected])
