"Let's Just Survive the First Half"…New LCCs Rush to Secure Funding

[Asia Economy Reporter Dongwoo Lee] Emerging low-cost carriers (LCCs) are accelerating efforts to secure operating funds amid the prolonged COVID-19 pandemic. With travel demand expected to recover following the full-scale vaccination rollout in the second half of this year, these airlines are focusing on raising funds to overcome the "COVID-19 hardship" in the first half.

According to industry sources on the 12th, Juwon Seok, CEO of Fly Gangwon, which is based at Yangyang International Airport, is preparing to inject personal funds next month to secure company liquidity. CEO Juwon Seok plans to sell his stake in "Ayum," a resort located in Yangyang, Gangwon Province, where he is the largest shareholder, and use the proceeds as operating capital for Fly Gangwon.

As of the first half of last year, CEO Juwon Seok and related parties held 200,000 shares of Ayum, accounting for 73.2% of the total. Although the exact amount of the injection has not been disclosed, it is estimated that tens of billions of Korean won will be invested, considering Fly Gangwon’s monthly operating cost is about 1.6 billion KRW. CEO Juwon Seok’s personal fund injection is also seen as a strategic move to secure an additional 6 billion KRW in support from Gangwon Province this year.

Air Premia recently attracted an investment of 65 billion KRW by selling up to 68.9% of its shares to JC Partners and the KoChina consortium, a Hong Kong-based Korean logistics company. The company has secured the first tranche of 15 billion KRW from the investment and plans to bring in its first aircraft, a Boeing 787-9, in early next month to commence operations in the second half of this year. The production of the second and third aircraft has also been completed and is scheduled for delivery within the year. The company plans to secure an additional 10 billion KRW in investment by the end of this month and sequentially inject these funds into operational expenses during the first half.

Aero K is also preparing a paid-in capital increase to raise funds with the goal of launching flights to Jeju next month. Due to the impact of COVID-19, the company has nearly exhausted its initial capital of 48 billion KRW obtained at the time of licensing. The company aims to secure up to 5 billion KRW in operating funds this year to begin stable operations.

An aviation industry official said, "It is urgent to raise funds by minimizing costs to overcome the difficulties caused by COVID-19," adding, "We expect management conditions to recover if we can endure until the first half of the year."