Court begins debt-rescheduling process for troubled budget carrier Fly Gangwon

The Seoul Bankruptcy Court has begun its debt-rescheduling process for Fly Gangwon Co., the court said Friday, about three weeks after the financially troubled budget carrier applied for court receivership.

On May 23, just days after halting operations due to snowballing losses, Fly Gangwon filed documents with the court to start the debt restructuring program.

Fly Gangwon began operations in November 2019 after obtaining a certificate from the Ministry of Land, Infrastructure and Transport.

It offered flights on five international and two domestic routes but inked heavy losses and failed to make payments for the lease of chartered planes due to the impact of the COVID-19 pandemic on the airline industry in recent years.

Early in May, a homegrown private equity fund signed a memorandum of understanding with Fly Gangwon to inject 100 billion won (US$75 million) but withdrew its planned investment after conducting due diligence on the company.

In response to Fly Gangwon’s “irresponsible” decision, Transport Minister Won Hee-ryong said the company should have notified reserved customers of its future compensation plans in advance.

A total of 38,000 people had booked flights on the carrier’s Yangyang-Jeju Island route and five international routes by the end of October, according to the Ministry of Land, Infrastructure and Transport.

The government will have Fly Gangwon take full responsibility for the damages it caused to customers and make efforts to minimize the inconvenience of local residents who used the Yangyang airport in Gangwon Province, the ministry said.

Fly Gangwon once operated three chartered planes — two B737-800 and one A330-200 passenger jets — but it had one B737-800 as of May 19. The sole plane was permanently grounded May 20.

The company is in a full-scale capital erosion.

Fly Gangwon CEO Joo Won-suk owns a 55 percent stake in the debt-ridden carrier, and the remainder is held by others.