SEOUL, Feb. 20 (Korea Bizwire) — The three-party alliance led by Hanjin Group heiress Cho Hyun-ah, widely known for the “nut rage” incident in 2014, on Thursday reiterated a need to replace the current leadership of the debt-laden South Korean airline conglomerate.
The 45-year-old heiress has recently joined hands with the Korea Corporate Governance Improvement (KCGI) and the midsized builder Bando Engineering & Construction Co. to invite a new chief for the logistics-centered conglomerate to improve the group’s financial status and its shareholder value.
The KCGI recommended Kim Shin-bae, who served as executive vice chairman at SK Group and president at SK Telecom Co., as a professional manager who will replace Cho Won-tae, current chairman of Hanjin Group and Korean Air Lines Co., also her younger brother.
“Hanjin KAL and Korean Air’s accumulated losses reached 1.74 trillion won (US$1.45 billion) during the 2014-19 period and Korean Air’s debt-to-equity ratio soared to 861.9 percent during the same period as a result of unilateral and short-sighted investment decisions by the management,” KCGI Chief Executive Kang Sung-boo said in a press conference.
Korean Air’s overwhelming debt ratio is far higher than United Airlines’ 366 percent, Delta Air Lines, Inc.’s 329 percent and Asiana Airlines Inc.’s 264 percent, he said.
The heiress alliance has said that they have no interest in taking over the management of Hanjin Group.
Under the leadership of a professional manager, the decision-making process should transparently improve for the benefit of employees and shareholders, Kang said.
Kim Shin-bae who attended the press conference said if he has an opportunity to lead Hanjin Group, he will put a top priority on reviving the company’s corporate value, which is “seriously damaged” due to mismanagement by the Hanjin family.
Hours after the KCGI-led press conference, Hanjin Group released a statement to rebut the alliance’s arguments.
Hanjin Group said Hyun-ah apparently has an interest in participating in the group’s management and the professional manager candidate Kim Shin-bae has no experience and expertise in the airline industry.
As for its heavy debt ratio, the group said it chose its own planes for a stable operation of the fleet and growth and the debt increased due to the won’s weakness against the dollar.
The Hyun-ah coalition has been at loggerheads with her brother Won-tae, 44, and other family members over the way of managing the airline-to-logistics conglomerate.
To be reappointed as chairman of Hanjin Group and the national flag carrier, Won-tae needs to obtain an approval at Hanjin KAL Corp.’s shareholders meeting on March 25.
Hanjin KAL is the holding company of Hanjin Group, which has Korean Air and low-cost carrier Jin Air Co. under its wing.
Won-tae took the helm of Hanjin Group and Korean Air in April last year following his father’s death.
In response to Hyun-ah’s alliance with the KCGI and Bando, her mother Lee Myung-hee and younger sister Hyun-min, 37, said they stand against Hyun-ah’s approach.
They asked Hyun-ah to come back as a member of the Hanjin family and join forces to promote the group’s stability and development.
Korean Air’s 10,000-strong union said it will take all possible measures to block the plan proposed by the heiress coalition.
For 2019, Korean Air’s net losses widened to 624.87 billion won from 185.65 billion won a year earlier on lower demand on Japanese routes and declining cargo-carrying volumes.
In a regulatory filing on Thursday, KCGI said the three-party alliance’s stake in Hanjin KAL rose to 37.8 percent from 32.06 percent.
The stake is higher than the 33.45 percent collectively held by Won-tae, his mother, younger sister, related people, Delta Air and the country’s leading messaging app, Kakao Corp.
“The alliance can exercise voting rights over a 31.98 percent stake they purchased last year at this year’s shareholders’ meeting next month,” a Korean Air spokeswoman said.