Air Busan "Capital Increase and Expansion of Japan Routes... Expecting a New Leap"

Subscription Rate of 138.91% Recorded... "Secured 133.9 Billion Won in Funds"

[Asia Economy Reporter Yoo Hyun-seok] Air Busan is embarking on a full-scale resurgence through securing funds from a successful rights offering, expanding its Japan routes, and improving its performance.

Air Busan announced on the 27th that it successfully raised 133.9 billion KRW by achieving a subscription rate of 138.91% in the rights offering conducted from the 19th to the 23rd.

In the subscription by employee stock ownership and existing shareholders, a high subscription rate of about 92% was recorded. During the general public subscription for forfeited shares by existing shareholders on the 22nd and 23rd, the subscription was completed for all shares to be issued, with a competition rate of 5.84 to 1 for approximately 4.18 million shares offered.

Asiana Airlines, the largest shareholder of Air Busan, participated in the rights offering with an investment of 54.5 billion KRW. Most of the existing shareholders, including Busan City and local Busan companies, also participated. Air Busan evaluated that the success of this rights offering reflects the market’s positive outlook on Air Busan’s recovery and growth potential, as well as the trust of existing shareholders and local residents, despite adverse conditions such as high exchange rates and a sluggish domestic stock market. An Air Busan official stated that some local Busan shareholders even made excess subscriptions, confirming the strong expectations for Air Busan’s recovery and the passionate support of the local community.

It is also analyzed that the recent announcements of resuming visa-free entry to Japan and Taiwan and the lifting of PCR test requirements after entry, which are expected to accelerate the recovery of low-cost carriers, positively influenced this successful rights offering.

Along with this, Air Busan will significantly expand operations on major Japan routes departing from Gimhae Airport and Incheon Airport starting next month, following Japan’s announcement allowing visa-free individual travel.

From the 11th of next month, the Busan-Fukuoka and Busan-Osaka routes will be increased to one round trip daily. From the 17th, this will be further increased to two round trips daily. At Incheon Airport, the Osaka route will be increased to one round trip daily starting from the 20th of next month. Currently, Air Busan operates five Japan routes: Busan-Fukuoka (3 times weekly), Busan-Osaka (4 times weekly), Incheon-Fukuoka (3 times weekly), Incheon-Osaka (3 times weekly), and Incheon-Narita (once daily).

According to Air Busan, following Japanese Prime Minister Fumio Kishida’s announcement on the 22nd of allowing individual travel and lifting visa-free entry restrictions from October 11, the reservation rate for Japan routes in October has noticeably increased. For some routes, the reservation rate as of the 26th increased by about 20% compared to just before the announcement on the 22nd. Most new reservations are for departures after October 11, when visa-free entry is allowed. An Air Busan official said that the demand for individual travel is clearly increasing.

Japan routes accounted for more than half of Air Busan’s total international passengers in 2018 and are a core route with an average annual load factor of 84.6%. In particular, Air Busan has unique operational know-how and experience, operating five round trips daily between Gimhae Airport and Fukuoka and four round trips daily to Osaka. Considering Air Busan’s strengths on Japan routes, the weak yen, and the allowance of visa-free individual travel, it is expected that Air Busan’s performance improvement driven by the recovery in Japan travel demand will accelerate further.

An Air Busan official said, “We believe that the successful rights offering and the visa-free entry allowance to Japan have laid the foundation for performance improvement and resurgence.” He added, “If route normalization follows the recovery in Japan travel demand, Air Busan, as the leader on Japan routes, will be the biggest beneficiary and is expected to secure an absolute advantage in the post-COVID aviation market.”