Jeju Air, South Korea's largest low-cost carrier, plans to enter the hotel business and buy its own aircraft, in search of a new revenue stream amid fierce competition among local budget airlines.
The carrier will commit US$54.9 million to build a 17-story hotel near Hongik University in Seoul, a popular destination among young people and tourists, the company said in a regulatory filing.
Marking a foray into the new business aims at attracting more inbound tourists and boosting sales by diversifying their portfolio, the firm said.
The construction of the hotel is expected to be completed by 2018.
"We will push for further consolidation in the market as a flagship airline and widen the gap with second movers through new growth engines, including hotel business and a new pan-regional LCC alliance," the company said.
Jeju Air, with its entire fleet composed of leased aircraft, will purchase three Boeing 737-800 jets in a bid to cut maintenance and lease costs.
The company signed a deal worth 310 billion won and will take delivery of the new aircrafts in 2018.
The moves came after the country's sixth low-cost carrier Air Seoul launched in July, intensifying competition in the market where Jeju Air has been enjoying a dominant position the past several years.
On the day, the air carrier said it posted a 47.2 percent slump in first-half profit at 16.2 billion won, from 30.7 billion won in the six-month period that ended June 2015. Sales rose 16.9 percent to 335.3 billion won from 288.8 billion last year.