Jin Air Co., the budget unit of Korean Air Lines Co., plans to break even by 2010, with high ticket sales expected to offset low fares and rising fuel costs.

The carrier, set to begin services next month, is targeting sales of 160 billion won (US$156 million) in 2010, it said in a statement on June 17. Revenue will likely be 18 billion won this year and 120 billion won next year.

Korean Air, South Korea's biggest carrier, is starting Jin Air as it struggles with surging jet-fuel costs and rising low-cost competition from Jeju Air Co. and planned carriers backed by Asiana Airlines Inc. and Tiger Airways Pte. The Seoul-based airline will focus on more profitable long-haul and business travel, while Jin Air will target the short-haul leisure market.

"It's not a good time to begin the business considering the high fuel price," said Jee Heon Seok, an analyst at NH Investment & Securities Co. "Still, it's hard for Korean Air to ignore the growing demand for budget travel." Jee has a "market perform" rating on Korean Air.

Jin Air will begin flying between Seoul and Jeju from July 17. Seoul-Busan and Busan-Jeju flights will start by April. The carrier also plans to add services to China, Japan and Southeast Asia from the second half of next year.

Cost-Cutting Carrier

Jin Air intends to cut costs through steps including Internet-only bookings and using flight attendants to clean aircraft. Its fares will be about 80 percent the price of conventional carriers, Chief Executive Officer Kim Jae Kun told reporters in Seoul on June 17.

"Our focus will be on mid-to-short-haul demand from tourists keen on good fares," he added. The carrier won't levy surcharges unless fuel prices rise beyond a level it can tolerate, he said, without elaboration.

Korean Air has no plans to cut back its domestic operations following Jin Air's entry into service, Kim said. The carrier flies on all three routes that Jin Air will serve.

The budget carrier expects a net operating loss of 6.5 billion won this year and an operating profit of about 5 billion won in 2010, Marketing Manager Lee Jin Woo said. The earnings forecast assumed jet-fuel prices of 350 cents per gallon, Kim said. Prices are currently at least 15 percent higher, he added.

Jin Air will operate five planes by next year, comprising three Boeing Co. 737-800s and two Airbus SAS A300-600s. It will adopt a more informal style than its parent, with brightly colored aircraft and cabin crew wearing jeans. Jin comes from a Chinese character meaning "true" or "genuine". It can also be interpreted as "jeans".

Asiana, South Korea's second-largest carrier, announced in February that it would set up a low-fare airline by buying a 46 percent stake in Busan International Air. Tiger Air, the low-fare carrier partly owned by Singapore Airlines Ltd., is also forming a budget carrier with Incheon's city government.

Photograph: Jin Air held a press conference on June 17. Photo by Yonhap news agency.