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UPDATE 2-S.Korea's Jin Air to list by year-end amid increase in rivals, China tension
April 25, 2017 / 1:05 AM / 5 months ago

UPDATE 2-S.Korea's Jin Air to list by year-end amid increase in rivals, China tension

* Number of budget airlines may double in near-term -analyst

* Listing comes as diplomatic spat scares off China tourists

* IPO funds could improve parent finances -analysts (Add comments from Jin Air and analyst, background)

By Hyunjoo Jin

SEOUL, April 25 (Reuters) - South Korean budget airline Jin Air Co Ltd on Tuesday said it plans to list on the stock exchange by the end of the year, at a time when the number of low-cost carriers looks set to double in coming years, while a diplomatic row with China impacts tourism.

The affiliate of the country’s biggest carrier, Korean Air Lines Co Ltd, has chosen Mirae Asset Daewoo to manage an initial public offering (IPO) that MoneyToday reported would yield a market value of 500 billion won to 700 billion won ($442 million to $619 million).

Jin Air said proceeds from the IPO would be used to fund investment for growth, such as buying aircraft.

Analysts said the proceeds could also to help improve the financial health of parent Hanjinkal, whose cash has dwindled since the bankruptcy last year of unit Hanjin Shipping Co Ltd.

The IPO announcement comes less than a year after the number of budget carriers reached six with the launch of Asiana Airlines Inc affiliate Air Seoul Inc.

Competition is likely to intensify further as six more firms aim to begin operating budget airlines by early next year, though some of those plans may be delayed, according to a research report from Korea Investment & Securities.

Jin Air said it intends to use IPO proceeds to increase market share by expanding to 30 jets and 55 routes by 2018, from 22 and 36 at present. It also targets revenue of over 1 trillion won in that year, from 719.7 billion won last year.

The IPO announcement also comes as airlines suffer from the fallout of a spat between Beijing and Seoul since March over the latter’s planned anti-North Korea missile defence system.

China’s tourism ministry instructed tour operators to stop selling trips to South Korea from March 15. Jin Air, Asiana and Jeju Air Co Ltd have also had applications for charter flights to China rejected.

The row is likely to have a limited impact on low-cost carriers which have less exposure to China than full-service airlines, analysts said.

At Jin Air, China accounts for some 5 percent of revenue, a spokesman said. The airline has reduced or suspended flights to its two Chinese destinations - Shanghai and Xian - and is using planes for Japan and Southeast Asia routes instead, he said.

South Korea’s first budget airline to list was Jeju Air in November 2015, debuting at 49,500 won after an IPO priced at 30,000 won. But its shares have fallen to around 32,250 won as investors fret about competition and political tension, analysts said. ($1 = 1,131.1000 won) (Reporting by Hyunjoo Jin; Editing by Christopher Cushing)

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