South Korea’s Ministry of Land, Infrastructure and Transport (MOLIT) has decided to go ahead with its plan to conduct an investigation into the finances of Eastar Jet (ZE, Seoul Gimpo) to see if any violations took place as the budget carrier sought government approval to obtain an Air Operator’s Certificate (AOC) and relaunch flight operations. The probe could result in the revocation of its business licence, the ministry warned.
Financial statements published in May 2022 showed that Eastar had lapsed by the end of 2021 into a state of complete capital erosion - seen as a critical situation in South Korea in which the total amount of capital at a company falls below zero and erodes the paid-in capital.
According to the ministry, the restarting airline had failed to indicate this and submitted false accounting statements when applying for its AOC last year, certification for which the carrier is still waiting. The decision to press ahead with a probe follows a suggestion the ministry would do so in early July and will further delay the carrier’s relaunch plans.
“We have ordered a thorough investigation into the allegation that Eastar Jet has intentionally submitted false data to the Ministry of Land, Infrastructure and Transport and interfered with the air transportation business licence process” at the ministry, a MOLIT representative said at a press briefing on July 28.
Eastar Jet has insisted that it has done nothing wrong as the documents submitted to the ministry were based on the only financial data available at the time - those as of the end of May 2020. It only found unexpected losses in its 2021 financial statements when its accounting system was recovered in February 2022 following a lengthy suspension of the system due to cost issues.
