Korea’s Eastar Jet may resume flight ops in late 2Q21 – CEO

Rising chances of an acquisition mean that Eastar Jet (ESR, Seoul Gimpo) could resume flight operations in June, the indebted low-cost carrier’s chief executive confirmed to the Yonhap News Agency on February 18. The number of potential buyers, including a private equity fund and a construction company, has risen from four to six or seven, with the acquisition process set to be finalised by late May, sources said. Seoul Bankruptcy Court initiated corporate rehabilitation proceedings at the grounded carrier on February 4, three weeks after granting it insolvency and protection from creditors. The move, coupled with a drastic downsizing of the company, has raised interest in it among potential buyers. Eastar Jet has reportedly opted to negotiate a potential acquisition through a “stalking-horse bid” in which an insolvent company seeks a buyer from a pool of bidders while already having selected an initial bidder in an effort to maximise the value of its assets. CEO Kim You-sang confirmed to Yonhap that “six to seven companies have contacted Eastar with the intention to make an investment in the carrier. The company will receive a letter of intent from potential investors in March and aims to select one of them as the new owner.” The company will submit its debt-repayment and other restructuring plans to the court by May 20 with the aim of resuming flights on domestic routes as early as June, the chief executive said. Its Air Operator’s Certificate (AOC) will be reinstated once the court accepts the restructuring and rehabilitation schemes, he assured. “There will be no massive job cuts in the course of the court-led rehabilitation process as many of the employees have already left the company,” he said. Eastar Jet’s inactive all-leased fleet currently consists of four B737-800s and two B737-8s, according to the ch-aviation fleets advanced module. Last September it returned 10 of its 16 aircraft and laid off 600 employees. Aviation industry sources have told local media that Eastar Jet could cost its buyer around KRW120 billion won (USD108 million) if debts of KRW170 billion (USD154 million) are settled through the rehabilitation process. The company did not receive funding from the government or from the financial sector due to its capital erosion and lack of assets for collateral. This means that a significant outlay of additional funds besides the acquisition cost is not required. As one source told the Dong-A Ilbo newspaper, “All airlines are working hard on restructuring, but Eastar Jet is already receiving positive reviews for its significantly reduced body weight.”