Financially-troubled Fly Gangwon applies for court receivership

Fly Gangwon Co., a South Korean low-cost carrier, said Wednesday it applied for court receivership late last month, just days after halting operations due to snowballed losses.

Fly Gangwon filed documents with the Seoul Bankruptcy Court on May 23 to start the court-led debt rescheduling process. The court is expected to decide on whether to accept it or not as early as this week, a company spokesperson said over the phone.

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 have 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 a B737-800 aircraft as of May 19. The sole plane was grounded from May 20.

The company is in a full-scale capital erosion.

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