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Heiress-led coalition recommends new chief for debt-laden Hanjin Group

All News 14:11 February 20, 2020

By Choi Kyong-ae

SEOUL, Feb. 20 (Yonhap) -- 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.

This photo taken Feb. 20, 2020, shows Kang Sung-boo, CEO of the local activist fund Korea Corporate Governance Improvement (KCGI), delivering a briefing on measures to regain the financial health of the airline conglomerate Hanjin Group at a press conference held at Glad Hotel in Yeouido, Seoul.

"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 KCGI chief said the decision-making process should be improved in a transparent manner for the benefit of employees and shareholders.

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.

The heiress-led alliance 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.

This image shows Hanjin Group's inheritors Cho Hyun-ah (L) and Cho Won-tae, chairman of the group and its flagship Korean Air Lines. (Yonhap)

kyongae.choi@yna.co.kr
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