Aviation asset management and investment firm AIP Capital has taken a stake in Eastar Jet (ZE, Seoul Gimpo) in a limited partnership deal with VIG Partners, the South Korean private equity entity that acquired 100% of the low-cost carrier earlier this year. The dollar value of the transaction, announced on September 5, was not disclosed. However, an AIP spokesperson told ch-aviation they had secured a 10% stake.
As part of the deal, AIP will place five B737-8s at Eastar Jet. Two of those planes, HL8542 (msn 44304) and HL8543 (msn 44305) arrived at Eastar Jet in August, while the third, N798BA (msn 44308), will be delivered to the airline in September, with the final two in the third quarter of 2024. 777 Partners owns AIP Capital. It also recently acquired a 30% stake in Dreamstone Aviation Partners, a subsidiary of Dreamstone Partners, to expand its business in the Asia Pacific region. Founded earlier this year, AIP Capital says it has USD10 billion of capital deployed across debt and equity in the aviation sector. It also says it owns and manages approximately 30 aircraft, with a further 68 on order.
“We are pleased to be a first mover with Eastar Jet immediately following the acquisition by VIG Partners. AIP’s commitment of five B737 MAX aircraft and concurrent financial investment was key in Eastar continuing as a Boeing operator as they seek to grow the airline," said Jared Ailstock, a managing partner at AIP Capital.
The deal comes as Seoul business media report that potential buyers are scouting out opportunities across the South Korean low-cost carrier sector, with stakes held by private equity companies targeted. Korea's Naver outlet cites investment banking sources and says full or partial private equity owners of LCCs regularly receive unsolicited calls from would-be buyers. "There appears to be an intention to trade management rights in various LCCs, regardless of holding period," the report noted.
South Korea's LCCs include Jeju Air, Jin Air, Air Premia, t'way Air, Air Busan, Aero K, and Eastar Jet. JC Partners, a private equity firm, wholly owns Air Premia. That entity acquired Air Premia in 2021, and ch-aviation recently reported that JC Partners was planning a partial divestment in order to recover the initial KRW67 billion won (USD50.1 million) investment. Private equity firms also hold sizeable share parcels in another low-cost carrier, t'way Air. Those share parcels are also said to be the subject of interest from potential buyers.
One of the contributing factors to strong investor interest in the South Korean low-cost carrier segment is its strong financial recovery. While debt levels at many of the carriers remain high, their financial results are improving every quarter. The three major South Korean low-cost carriers, Jin Air, Jeju Air, and t'way Air, are expected to generate a combined operating profit of KRW181.9 billion won (USD137.2 million) this quarter, a sharp turnaround from the KRW110.6 billion (USD83.4 million) loss in the comparable 2022 quarter. ch-aviation recently noted that Eastar Jet was no longer in a state of capital erosion and is on track to obtain a capital surplus of KRW570 billion (USD430.4 million) this year.
