Air Premia mulls $110 mn rights offer for more long-haul flights

South Korean low-cost carrier (LCC) Air Premia Inc. will make a decision on a rights offering worth up to 150 billion won ($110.4 million) at a board meeting next month, to introduce more long-haul aircraft, banking sources familiar with the matter said on Thursday.

With additional aircraft, the smaller carrier aims to boost sales and secure some long flight routes that Korean Air Lines Co. may have to give up to acquire Asiana Airlines Inc.

Air Premia’s largest shareholder, a consortium led by Seoul-based private equity firms AP Holdings and JC Partners, is considering pouring up to 100 billion won for a rights issue, raising its ownership from 60.5% to 74.5%.

The other stakeholders with 39.5%, including Hong Kong-based Korchina Logistics Holdings Ltd. former Chairman Park Bong Chul with 13.4% and healthcare services provider Seouleaguer Co. and its affiliates holding 7.8%, are considering injecting up to 50 billion won for new share sales.

The AP Holdings-JC Partners consortium emerged as Air Premia’s largest stakeholder with management rights in late June last year.

AP Holdings bought a 21.4% stake in the budget airline from JC Partners for 56.6 billion won, raising its ownership from 9% to 30.4%. JC Partners’ holding declined from 56.7% to 35.3%.

To finance rights issues, Air Premia aims to borrow 130 billion won with a three-year maturity and allocate 106 billion won for senior secured loans and 24 billion won for subordinated loans. 

BENEFITS FROM POSSIBLE MERGER 

Air Premia is likely to receive long-haul routes from Korean Air Lines, if the flag carrier’s merger with Asiana Airlines is approved. The proposed Korean Air-Asiana combination is pending approval from the US and Europe, where it faces tougher scrutiny because of monopoly concerns.

Air Premia plans to use the funds raised through the rights offering to rent more aircraft for long-haul routes to New York, Frankfurt and other big cities. The company introduced two more airplanes earlier this year and will rent an additional four within two years, operating nine by 2025.

The LCC expects more long-haul operations to boost its sales. The introduction of two to five aircraft per annum could more than triple its revenue, according to banking sources.

Boeing 787-9, the aircraft it introduced this year, enhanced the budget airline’s profitability as each plane can carry 15 tons of air cargo or more, about three times the capacity of other LCCs' cargo planes.

Air Premia is striving to expand mid- and long-haul routes while other Korean LCCs, such as Jeju Air Co., T'way Air Co. and Jin Air Co., are focusing on shorter routes. Air Premia started services on the Incheon-Los Angeles route in October last year, becoming the first local LCC that offers services on such a long flight route.

It operates five international routes to New York, Los Angeles, Hawaii, Bangkok, Frankfurt and Tokyo as of Oct. 19. The carrier ended domestic routes operation in late 2021 to focus on international flight services.

The carrier posted 53.1 billion won in revenue and 47 billion won in operating losses last year. It aims to enhance profitability with over 80% occupancy rates for all global routes.   

Write to Ji-Eun Ha at hazzys@hankyung.com
 


Jihyun Kim edited this article.