VIG acquires Korea's Eastar Jet
Korea’s VIG Partners has acquired 100% of local low-cost airline Eastar Jet for USD 117m, citing plans to introduce new aircraft to the fleet as part of a “quick turnaround.”
The total transaction amount was confirmed by a source familiar with the situation. It includes about USD 90m that will be used to improve the troubled company’s financial structure and management system.
This is the eighth investment from VIG’s fourth fund, which closed on USD 810m in 2020 primarily for mid-market opportunities in the domestic consumption space. It targets companies with enterprise valuations of USD 70m to USD 500m.
Eastar was founded in 2007 and flew its first domestic and international flights in 2009. It is one of the most recognised names in budget air travel locally with international connections covering Greater China, Southeast Asia, and North Asia, including Russia’s far east. The business peaked at about 10m passengers a year in 2014.
The pandemic has been a difficult period, with Eastar facing a credit crunch that resulted in a suspension of its operator license and forced financial rehabilitation. Capital impairment continued even after the rehabilitation process, which lasted a year, and additional investment was necessary for the financial restructuring and normalisation of the business.
VIG’s plan includes developing an advanced operating system to provide improved customer service, implementing a transparent management structure, and introducing the Boeing 737, a less than 200-seat capacity aircraft, to the fleet.
The private equity firm has also brought in Joong Seok Cho, formerly of Asiana Airlines, as the new CEO. Cho has served as a senior vice president and head of Korea at Asiana as well as head of business management at Air Busan.
“EastarJet once was a success story in the Korean low-cost carrier [LCC] industry. Going forward, with the current capital injection by VIG Partners and the institution of top-tier management personnel, we firmly believe in the long-term growth prospect of EastarJet and its potential to become the leader in the LCC industry,” Jason Shin, a managing partner at VIG, said in a statement.
Recent activity in this space includes Japan’s Integral Corporation achieving at least a partial exit from Skymark Airlines last month in a JPY 32.5bn (USD 242m) IPO. The stock has traded in positive territory to date. Integral invested JPY 9bn in a 50.1% stake in 2015.
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