Exclusive
Park Bong-chul, Chairman of Korchina, Appointed as Executive Director of 'Receivership' Airline Hi Air

[비즈한국] Hi Air has appointed Park Bong-chul, Chairman of Korchina, as its executive director. As a small-scale air transport business, Hi Air began operations in December 2019 but suspended flights in September 2023 due to financial difficulties. The airline is currently undergoing rehabilitation procedures. A consortium consisting of Sangsangin Securities001290, Chairman Park Bong-chul, and Alpha Plus Asset Management is pushing for the acquisition of Hi Air. Even though the acquisition has not yet been finalized, the appointment of Chairman Park as an executive director suggests that the consortium intends to directly manage the rehabilitation process of Hi Air.

According to the corporate registry, Hi Air appointed Chairman Park Bong-chul as an executive director on December 23 last year. The Debtor Rehabilitation and Bankruptcy Act states, "When appointing a director for a debtor, the method of appointment and the term of office must be determined in the rehabilitation plan," and "Once the method is determined, a director may be appointed or a representative director may be selected in accordance with the method stipulated in the rehabilitation plan." Therefore, it is interpreted that the proposal to appoint Chairman Park as an executive director was included in Hi Air's rehabilitation plan.

Chairman Park Bong-chul has been pursuing the acquisition of Hi Air since April last year by forming a consortium with Sangsangin Securities, Alpha Plus Asset Management, and others. This means that Hi Air's corporate rehabilitation and M&A are being pursued simultaneously. With Chairman Park's appointment as an executive director, the consortium is expected to take the lead in Hi Air's rehabilitation efforts.

Chairman Park Bong-chul is a former Korean Air resident representative in Hong Kong and founded the logistics company Korchina in Hong Kong in 1994. He made his presence felt in the aviation industry by investing in Air Premia in 2021. As of the end of that year, he was the largest shareholder with a 24.02% stake in Air Premia. Later, as JC Partners participated in Air Premia's paid-in capital increase, Chairman Park was pushed out of the largest shareholder position.

The parties involved are remaining tight-lipped regarding the appointment of Chairman Park Bong-chul as an executive director of Hi Air. Both Sangsangin Securities and Korchina have not issued any special statements regarding Chairman Park. BizHankook attempted to reach Hi Air for comment but was unable to make contact. Rumors are circulating in the securities industry that Hi Air's rehabilitation process will be completed within February.

However, even if Chairman Park Bong-chul takes direct charge of Hi Air's management, there is no guarantee of operational normalization. The domestic routes previously operated by Hi Air included Gimpo-Jeju, Gimpo-Ulsan, Gimpo-Sacheon, Gimpo-Yangyang, Gimpo-Muan, Jeju-Muan, Jeju-Ulsan, and Jeju-Sacheon. With the exception of Gimpo-Jeju, these routes are difficult to generate significant profits. Currently, the airline has not launched services to Gimhae International Airport, the largest airport in the southeastern region.

Regarding international routes, Muan-Kitakyushu was the only route. However, the number of passengers using Muan International Airport is low. According to the Ministry of Land, Infrastructure and Transport's Air Portal System, the number of international passengers at Muan International Airport in 2024 was 355,620. This is only 0.40% of the total 88,926,621 international passengers. The atmosphere is also unsettled due to the Jeju Air passenger plane incident at Muan International Airport late last year.

Hi Air recorded operating losses of 7.6 billion KRW and 11 billion KRW in 2022 and 2023, respectively. Even if operations resume, there is no guarantee of profitability. As of the end of 2023, total capital was negative (-) 29.3 billion KRW, indicating complete capital erosion. The Sangsangin Securities consortium will need to inject significant funds to normalize Hi Air's management.

The Sangsangin Securities consortium plans to invest a total of 32.1 billion KRW in the acquisition of Hi Air. The problem is that Sangsangin Securities' recent performance is poor. In 2023, Sangsangin Securities recorded revenue of 182.2 billion KRW and an operating profit of 961.73 million KRW. However, in the first three quarters of 2024, it recorded revenue of 262.3 billion KRW and an operating loss of 35.7 billion KRW. While revenue increased, profitability worsened, leading to a shift into the red.

The recent financial situation is also not favorable. As of the end of September last year, Sangsangin Securities' debt-to-equity ratio was 979.45%. Cash and cash equivalents as of the end of September last year stood at 5.47129 billion KRW. For a company like Sangsangin Securities, an expenditure of tens of billions of won is bound to be a burden.

Because of this, there is speculation that the delay in the Sangsangin Securities consortium's acquisition of Hi Air may be due to problems with funding. An official from Sangsangin Securities stated, "We are currently proceeding with the Hi Air acquisition process," but added, "It is difficult to disclose specific schedules as they are confidential."