South Korean budget carriers are taking cost-saving measures to brace for a hit from the coronavirus outbreak in the first quarter, with operations already crippled by a loss of travelers to Japan and Hong Kong.

The combined operating loss of the country`s top four low-cost carriers - Jeju Air, Jin Air, T’way Air and Air Busan - amounted to 154.8 billion won ($130.2 million) in 2019, compared with a 232.4 billion profit in the previous year.

Air Busan, the fourth-largest budget airline under the full-service parent Asiana Airlines, alone reported a loss of 50.5 billion won. No. 2 Jin Air under Korean Air Lines followed with a loss of 49.1 billion won. Market leader Jeju Air and No. 3 T’way Air booked a loss of 34.7 billion won and 20.5 billion won, respectively.

Short-haul flights, which make up a bulk of the low-cost airline business, plummeted from the third quarter of last year amid a sharp drop in travel demand to Japan and Hong Kong. Trips to Japan plunged from July as incensed Koreans stopped making pleasure trips to Japan following a trade dispute rooted in Japan’s wartime history. Around the same time, anti-government demonstrations in Hong Kong started to escalate, with clashes between police and activists becoming increasingly violent.

Many carriers bumped up flights to Southeast Asia in response, but their bottom line suffered due to intensified competition.

Things have taken a turn for the worse with the new coronavirus epidemic. The first quarter is typically the airlines’ biggest season, with travel demand high due to the winter break and Lunar New Year holiday.

But carriers are projected to fall deeper into the red this quarter as flights to and from China, where the outbreak originated, have been suspended or slashed.

Some are already facing a liquidity crunch. Korea’s LCC leader Jeju Air recently admitted it would have to take on additional debt to maintain its operations. Eastar Jet scrambled to find another fueling source after it was cut off from its original partner for falling behind on fuel payments.

The virus has also taken a hit on overall travel demand. Data from the Ministry of Land, Infrastructure and Transport show that passenger numbers of local carriers at Incheon International Airport are rapidly dwindling. In the third week of January, the tally was 1.45 million. This fell to 983,597 in the first week of this month and 808,729 in the second week. Industry experts say this is partly because the peak season is coming to an end but is largely a result of the coronavirus, which started spreading rapidly in Korea in the end of January.

To weather the storm, budget carriers have announced a set of emergency measures.

Jeju Air and Air Busan executives agreed to hand over 20 to 30 percent of their wages. The two airlines, along with Jin Air, have also started forcing unpaid leave on all employees.

By Song Gwang-sup, Choi Keun-do and Kim Hyo-jin

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