After an initial public offering in 2015, Jeju Air was on fairly stable financial footing until the pandemic struck. Since 2020, it has been forced to raise capital on three separate occasions, totaling nearly $500 million. In also received a government loan of $29 million on the condition that it maintain 90 percent of its work force.
Even after travel restrictions were lifted and Jeju Air was awash in pent-up demand, its debt problems persisted because its costs were going up just as fast as its revenue.
In corporate filings, Jeju Air said it must repay roughly $165 million in short-term loans by the end of next September. That already exceeded its cash and cash equivalent balance of nearly $150 million. And this was before the run on cancellations that is expected to further crimp its cash balance.
But analysts said liquidity concerns are common for low-cost airlines.
“Most of these airlines, if you look at their financial position, you would think a lot of them are financially vulnerable but airlines have a way to survive these things more so than other companies,” said Brendan Sobie, an independent aviation consultant and analyst. He explained that companies in airline supply chains have a strong incentive to help airlines that experience trouble.
