Jeju Air planning IPO in first half of next year

Attention is on Jeju Air after Korea’s largest low-cost carrier (LCC) announced that it was preparing for an initial public offering next year.

Aekyung Group, the owner of the budget airline, on Monday said it selected Woori Investment and Securities to manage the IPO process and that it aims to list on the stock market in the first half of next year.

If the IPO is completed, Jeju Air will become the first local LCC to be listed on Korea’s stock market, setting an example for other local LCCs that are eyeings IPOs. It was rumored that Air Busan and Jin Air are also looking to list.

An official from Aekyung Group, which owns businesses ranging from chemicals to retail, said that it plans to list the LCC by issuing new shares and selling parts of the main owners’ existing shares.

The group estimates that the IPO will raise more than 200 billion won ($180 million). It plans to use the money as operating funds and for investments.

AK Holdings, the group’s holding company, and Aekyung Plaza, its retail subsidiary, have a combined 86.23 percent stake in the carrier, while Jeju Special Self-Governing Province and Korea Development Bank each hold about 4.5 percent stake.

However, the Jeju government’s shares could increase to 9.1 percent because it will receive about 1 million shares according to its contract with the company, which states the provincial government can receive additional shares for free once the company’s business is normalized.

When Jeju Air was established in 2005, the provincial government invested 5 billion won and secured a 25 percent stake, but since it didn’t participate in increasing the capital, its stake shrunk to 4.5 percent.

Jeju Air suffered losses for six years after it opened. But it made a turnaround in 2011 after collecting net profit of 16.8 billion won, followed by 5.3 billion won in 2012 and 19.4 billion won in 2013. This year, the company has posted net profit of 22.6 billion won through September.

BY JOO KYUNG-DON [kjoo@joongang.co.kr]