T'way Air's European windfall turns into costly burden

T’way Air's European expansion, once hailed as a windfall from the Korean Air-Asiana merger, is turning into an expensive test of its long-haul strategy, as rising fuel, maintenance and currency costs overwhelm healthy passenger demand.

Earlier, the low-cost carrier (LCC) took over routes from Incheon to Paris, Rome, Barcelona and Frankfurt, as part of regulatory remedies tied to the merger of the two full-service carriers.

Despite maintaining solid passenger demand, T’way is exposed to challenges of sustaining the business model in the face of worsening profitability.

Indeed, T’way Air is widely forecast to post the largest operating loss among Korea’s budget carriers in the second quarter.

According to market tracker FnGuide, the airline’s loss is estimated at 132 billion won ($89 million) between April and June, raising doubts over whether T’way’s expansion into the European routes has benefited the airline in terms of revenues.

On the surface, demand remains healthy.

In the first quarter, T’way recorded passenger load factors of 84 percent on its Incheon-Paris route, ...