Singapore Airlines in talks to buy stake in Korea's Jeju Air

Singapore's flag carrier Singapore Airlines (SIA) is in talks to buy a stake in South Korea's low-cost airlines Jeju Air, aiming to expand its budget operations.

"Singapore Airlines wishes to confirm that discussions have taken place on a possible equity investment in the airline," SIA said in a statement today.

Jeju City-based Jeju Air is majority owned by Aekyung Group with around 86-per cent stake. The airline's market capitalisation is estimated to be around $619 million.

The airline, formed in 2005, operates a fleet of 18 Boeing 737-800 aircraft and flies to 14 destinations.

According to an earlier Reuters report, the talks between Aekyung and SIA for a stake sale have been on for the last few months, as the Korean airline is planning to make an initial public offering later this year, making it the first listed Korean low-cost carrier.

Details of the stake size and pricing have not been decided yet. However, according to some media reports, SIA is looking to acquire around 20-per cent stake.

"These discussions may not result in a transaction. Singapore Airlines will make further public announcements as necessary," the statement said.

SIA, one of Asia's largest airline groups, is facing stiff competition from other carriers in the region and the Middle East and is looking to expand its budget operations through the stake purchase.

Besides flag carrier SIA, the group comprises regional airline SilkAir and low-cost carriers Scoot and Tiger Airways.

Last month SIA said its third quarter net profit rose threefold to $146 million and revenue was up 6 per cent at nearly $3 billion.

The higher net profit was attributed to an exceptional gain and boost in profit from low-cost carrier Tiger Airways.