The Gangwon Provincial Police Agency has opened an investigation into a payment made by the Yangyang County Mayor Kim Jin-ha to Fly Gangwon (Yangyang) twenty-four hours before the airline collapsed.
South Korea's No Cut News reports that the Chuncheon District Prosecutors' Office referred a complaint about the mayor paying Fly Gangwon KRW2 billion won (USD1.5 million) to keep the airline at the city's airport and also to provide discounted tickets to Yangyang residents. However, the timing of the payment, just before the airline ceased operations and filed for insolvency, has raised questions. ch-aviation is not suggesting Mayor Kim did anything wrong, only that a complaint was made.
While not identifying as the complainant, Yangyang County Assemblyman Park Bong-gyun said Fly Gangwon used the money to pay overdue salaries and then filed for insolvency. He also claims that the council did not make the payment through the normal subsidy programs. Instead, the mayor allegedly created a new subsidy protocol to make the payment. An in-house review of the payment cleared the mayor of any wrongdoing.
But now the Anti-Corruption and Economic Crime Investigation Unit of the Gangwon Police Agency will investigate the circumstances of the payment and the transfer process, as well as whether any breach of trust offences were involved. Yangyang County Council had previously supported Fly Gangwon in a bid to maintain scheduled services at the local airport. Earlier this year, as the low-cost carrier's financial circumstances became increasingly dire, it flagged moving its base from Yangyang to another airport, sparking a fierce backlash at the local government level.
"If Fly Gangwon goes bankrupt, it will be a huge loss to the residents of Yangyang-gun," a city official told local media at the time. "From the perspective of the local community, there is no choice but to save it. From the county's perspective, we supported it in the hope that it will help in the normalisation of Fly Gangwon."
The airline continues to harbour hopes of a relaunch, although the carrier has held onto just one aircraft and lost its air operator's certificate. Last month, the Seoul bankruptcy court agreed to extend the deadline for Fly Gangwon's management and administrators to lodge a rehabilitation plan. The new deadline is October 13. Management continues to hold talks with potential buyers and says that they hope to soon commence an open bidding process to sell what remains of the airline.
