Draft Fund Expands to LCCs... Will It Become Jeju Air Support No. 2?

Who is the Second Period Industry Stabilization Fund?
Jeju Air and Air Busan Meet Support Criteria Among LCCs

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] Jeju Air is emerging as the 'No. 2' recipient of the 40 trillion won-scale Period Industry Stabilization Fund (PISF). As financial authorities are considering expanding the application of the PISF to low-cost carriers (LCCs), there is an increasing possibility that the PISF, which was established to support nine major industries, will focus its support on the entire aviation industry.

According to the financial sector on the 24th, financial authorities are currently reviewing the possibility of providing PISF support to Jeju Air. After assessing Jeju Air's funding needs, they plan to discuss specific support measures.

The government is planning to support Jeju Air using a 135 trillion won financial support package, but if this proves insufficient, the possibility of PISF support remains open. A financial authority official stated, "We are not excluding the possibility of supporting Jeju Air through the fund," adding, "We will first check whether Jeju Air can cover all its required funds through the 135 trillion won financial support package, and if there is a shortfall, we may consider fund support."

However, even if financial authorities ultimately designate Jeju Air as an eligible applicant for PISF support, it remains uncertain whether Jeju Air will submit an application, which requires conditions such as maintaining at least 90% of total employment for six months and prohibitions on dividends and share buybacks.

If Jeju Air receives PISF support, it will become the second company to do so after Asiana Airlines. Previously, financial authorities decided to inject 2.4 trillion won from the PISF to normalize Asiana Airlines' management.

LCC Financial Support Package Insufficient... Jeju Air and Air Busan Meet Support Criteria

The financial authorities' consideration of PISF support for Jeju Air reflects the severe difficulties faced by the entire aviation industry due to the COVID-19 pandemic. Although the government's initial policy was to utilize the financial support package for LCCs, it was determined that additional support is necessary as the package alone is insufficient.

Currently, among LCCs, only Jeju Air and Air Busan meet the criteria for PISF support. To qualify for the PISF, companies must meet requirements such as total borrowings of 500 billion won, at least 300 employees, and COVID-19 related damages.

Jeju Air recently succeeded in capital expansion through a 150 billion won rights offering, using more than 110 billion won of this to repay debt, slightly improving its financial structure. However, it continues to face management difficulties as the COVID-19 crisis prolongs.

Industry insiders suggest that if Jeju Air becomes the second company to receive PISF support, the fund may focus its assistance on the aviation industry, which is unlikely to see immediate passenger demand recovery. There are also expectations that Korean Air, which announced a 'surprise performance' in the second quarter due to strong cargo operations amid ongoing COVID-19 spread, will eventually require PISF support.

This content was produced with the assistance of AI translation services.