South Korean Airlines Face Collapse as Fuel Costs and Iran Conflict Bite

South Korean airlines are struggling as rising fuel costs and the Iran conflict push them into financial distress. Several carriers have introduced emergency measures, including unpaid leave and delayed bonuses, to cut expenses amid record-high surcharges.

Air Premia, one of the hardest-hit, reported a 32.1 billion won ($22.1 million) operating loss in 2024, leaving its future uncertain. The crisis began in March when major Korean airlines declared emergency management due to the Iran war. Korean Air, Asiana Airlines, T'way Air, Jin Air, Air Busan, and Air Seoul all took action to reduce costs.

Fuel surcharges on international flights have now hit Level 33—the highest ever under the Transport Ministry’s system. Jeju Air, for example, raised its one-way surcharges to between $52 and $126 for tickets departing Korea.

Low-cost carriers (LCCs) have suffered the most. With less financial flexibility, companies like T'way Air and Aero K offered unpaid leave to employees. Jin Air went further, indefinitely delaying safety encouragement allowances for staff.

Air Premia’s situation is particularly dire. Its 2024 loss pushed its capital impairment ratio to 132 percent, risking license cancellation or business suspension if improvements aren’t made within two years. Industry experts warn that airlines may face continued pressure through June and July, even if some routes are cut. The combination of geopolitical tensions and soaring fuel costs has forced Korean airlines into tough decisions. Carriers will need to stabilise finances quickly or risk further operational disruptions. The next few months will be critical in determining whether these measures are enough to weather the storm.