Fly Gangwon to Complete Sale Next Week... Valued at Around 60 Billion KRW

Final candidate deposit secured, detailed arrangements underway
Securing aircraft and routes remains a challenge
Resumption of operations expected to take considerable time

The sale of low-cost carrier (LCC) Fly Gangwon is expected to be finalized by the end of this month. The valuation has been set at around 60 billion KRW. Although the airline is set for a fresh start after numerous twists and turns, it is anticipated that it will take considerable time to return to normal operations.

According to industry sources on the 25th, the sale process of Fly Gangwon, which has been ongoing for over six months, is expected to conclude as early as next week. Currently, a consortium formed by a strategic investor (SI) and financial investors (FI) has been selected as the final bidder, and they have paid a deposit while negotiating contract details with Fly Gangwon. The identity of the acquirer has not been disclosed due to confidentiality agreements. The original plan was to sign the acquisition contract by the end of last year, but the Seoul Bankruptcy Court, which is overseeing Fly Gangwon’s rehabilitation process, delayed the schedule by requesting additional financial documents such as proof of funding from the final bidder.

The actual funds the acquirer will need to inject are estimated to be between 60 billion and 80 billion KRW, which is higher than the contract sale price. Although some debts were discounted due to the rehabilitation process, unpaid wages and operating funds were added.

Fly Gangwon, which began operations in March 2019, raised expectations of revitalizing the neglected Yangyang Airport. Gangwon Province also supported the airline with tax subsidies exceeding 14 billion KRW. While the airline expanded its routes from Jeju to international destinations such as Japan, Vietnam, and the Philippines, demand at Yangyang Airport did not increase significantly. The impact of the COVID-19 pandemic compounded the difficulties, leading to a suspension of flights in May last year and the initiation of corporate rehabilitation procedures in June.

Shortly after, Fly Gangwon attempted to sell the airline through a "stalking horse" method, which involves signing a preliminary contract with a prospective buyer and conducting a public auction, but no one expressed interest in acquiring the airline. The first public auction held in October last year also failed. Multiple candidates competed in the public auction last month, resulting in the selection of a final bidder. A Fly Gangwon official explained, "Those who showed interest in the first public auction also participated in the second."

Even after the acquisition by the new owner is finalized, it is expected to take a considerable amount of time before actual flight operations resume. The Air Operator Certificate (AOC) obtained when Fly Gangwon launched has long been suspended due to no aircraft operations for over 60 days. Reissuing the AOC alone is expected to take several months. Considering the need to secure aircraft and routes, it is predicted that flight operations will not resume until at least the second half of this year. An industry insider said, "As travel demand surges again, airlines are competing to secure aircraft, so it will take a significant amount of time for Fly Gangwon to restart. Even after operations resume, business viability remains a challenge, so there will be many issues to consider such as relocating the hub airport and securing routes."