Korean LCC Fly Gangwon seeks to find new owner travel demand recovers

[Courtesy of Flygangwon]

FlyGangwon Co., South Korea’s low-cost carrier based in Yangyang, Gangwon Province, is looking to find a new owner as resumption of flights after borders reopen is helping to improve earnings and attracting interest from investors.

According to the investment banking industry on Sunday, Flygangwon has recently named Samjong KPMG LLC and KR Partners Co. as lead managers to raise funds that will include managerial rights in the airline. Chief Executive Officer Joo Won-suk, Ayum and other allied investors own the largest stake in the carrier at 44.2 percent. The second-largest shareholder is Sevenbridges Private Equity with 5.71 percent.

Fundraising will be carried out in the form of issuing new shares. Strategic investors including conglomerates are known to be considering investments.

Flygangwon provides inbound air services mainly for foreign passengers. It received a license to fly in 2019 and started its first flight at Yangyang International Airport in November the same year. The company suspended international flights due to the pandemic right soon after and losses were unavoidable. It resumed services to Clark, Philippines in June last year and sales more than doubled from the previous year on the back of growing demand, according to sources.

This upward trend can be further enhanced as Gangwon Province, which had been in conflict with the company over financial aid, has recently pledged to support Flygangwon actively to help it grow into a regional airline.

The province officials are conducting working-level discussions with Flygangwon on administrative and financial support. As it gains a new status as a special autonomous province in June, Gangwon Province plans to enhance airport competitiveness by designating Yangyang International Airport as a pilot inbound airport, creating a cargo terminal and extending the visa-free program that allows foreign visitors to stay in Korea for 30 days without a visa.

“We will do our best to help Flygangwon attract massive investment and become a company with a 100-year-old history based in Gangwon Province,” Joo said.

Flygangwon plans to use the proceeds from share sale to add more international flights. The company is said to be discussing with the aviation authorities in China to operate services to five cities there, including Bejing, Shanghai and Chengdu. Ten international routes will be available within this year, including those to Japan, the Philippines, Vietnam and Taiwan.

Its air cargo business will begin this month. “We plan to start cargo operations to Taipei and Hanoi from Feb. 24 after a successful test flight of our A330-200 aircraft,” said the company.

A number of other LCCs, in the meantime, are successfully attracting investments as demand for air travel recovers and profits are expected to improve as they get access to fly more mid- to long-haul services.

Cash-strapped Eastar Jet Co. was purchased by private equity firm VIG Partners earlier this year and conducted a rights issue worth 110 billion won ($86.3 million). Tway Air Co. raised funds in 2021 and 2022 from JKL Partners, which has become the airliner’s second-largest shareholder. Air Premia, which obtained its license in 2019, is also looking to sell the company.