This article appeared on Signal, the capital markets compass, at 3:41 p.m. on Sept. 18, 2026.
Jeju Air (089590), an affiliate of Aekyung Group, covered 99% of the cost of a new headquarters building, but title to the property went to AK Holdings (006840), the group's holding company, according to filings and industry sources. Because Jeju Air prepaid 40 years of rent in a single payment, AK Holdings will end up paying just 600 million won of the purchase price out of its own funds. Critics say the arrangement resembles gap investment — buying a home while a tenant's jeonse deposit covers most of the price. The interpretation is that Jeju Air, listed on the KOSPI, spent a large sum to support its holding company while giving up the benefits of owning its own headquarters.
AK Holdings' board recently approved the purchase of land and a building on Gonghang-daero in Seoul's Gangseo district from affiliate AM Plus Asset Development for 52.1 billion won, according to investment banking industry sources on the 18th. Payment is due on Oct. 6. Jeju Air plans to prepay 51.55 billion won in rent to AK Holdings in a lump sum for a lease running 40 years and six months, through April 2067.
The two transactions are tied together. In a regulatory filing, Jeju Air said the lease "takes effect on the conditions that the lessor's (AK Holdings') board approves the transaction and that it completes acquisition of title to the property," adding that the contract could be suspended if those conditions are not met. Under that structure, if AK Holdings fails to buy the building, Jeju Air's prepayment of rent is void as well.
The gap between the purchase price and Jeju Air's prepaid rent is only 600 million won. In effect, AK Holdings is covering the purchase price with Jeju Air's rent. Unlike gap investment, where the investment is funded by a tenant's deposit, AK Holdings has no obligation to return the rent. Jeju Air bore most of the purchase cost yet handed ownership of the headquarters to the holding company.
Jeju Air did secure some advantages. By paying about 40 years of rent upfront at an annual rate of 1.289 billion won, it avoided a separate security deposit and won a six-month rent waiver. It also removed the risk of long-term rent increases. About 500 Jeju Air administrative and support staff are scheduled to move into the new headquarters in the first half of next year. The company says the deal secures ample office space, which it had lacked, at relatively low rent compared with its existing leased premises. Jeju Air is also understood to have secured a right of first refusal on the building.
Those benefits, however, are conditions Jeju Air could have enjoyed had it bought the building itself. Direct ownership would also have offered the prospect of gains in asset value if property prices in the Gangseo area rise. The transaction between Aekyung Group affiliates also runs counter to the interests of Jeju Air's minority shareholders, analysts said.
Jeju Air has been hit hard by high fuel prices, posting a consolidated loss of about 45 billion won in the second quarter alone. A first-quarter profit kept operating profit at 24 billion won for the first half, but concerns about earnings across the low-cost carrier industry persist amid worsening conditions in the Middle East. On the same day it approved the headquarters lease, Jeju Air decided to raise 100 billion won by issuing hybrid securities at an annual yield of 7.5%. Even as it must shore up capital at a high interest cost to secure operating funds (10 billion won) and debt repayment funds (90 billion won), it has committed 51.5 billion won to rent alone.
Industry watchers have criticized the deal as indirect support for AK Holdings by an affiliate. AK Holdings has seen dividend income decline this year after selling Aekyung Industrial (018250), a core affiliate. An investment banking industry official familiar with office property investment said: "If Jeju Air intended to secure liquidity and improve cost efficiency, renewing the contract in five- or 10-year increments would be more reasonable than prepaying 40 years. It looks like nothing other than support for the holding company's purchase of tangible assets."
