SEOUL (Reuters) - Korean Air Lines Co Ltd’s chief executive on Monday said ownership discussions are ongoing with family members after their patriarch’s sudden death in April raised questions about the future of the airline and parent Hanjin Group.
Listed holding company Hanjin Kal Corp has been led by 43-year-old Walter Cho since the death of his father, Chairman Cho Yang-ho. However, it has yet to inform regulators who will officially lead the group, whose businesses also include hotels, logistics and budget airlines. Cho’s widow and two daughters, as well as his son, own stakes in Hanjin Kal.
“He told us harmony among family members is of utmost importance and what we must achieve through harmony is to protect the company,” CEO Cho said of his father at an annual meeting in Seoul of the International Air Transport Association.
The late tycoon died aged 70 following chronic illness just weeks after shareholders ended his 27-year tenure on the airline’s board due to perceived leadership failings.
The change at the top comes soon after a local activist fund raised its stake in Hanjin Kal to nearly 16%, bringing the group’s ownership structure to wider attention. The Cho family - including the late Cho’s 17.8% stake - and its academic foundations own 29%.
Cho’s death left his family with an inheritance tax bill of around 170 billion won ($143.72 million), equal to about half his entire Hanjin Kal stake, some analysts estimated. CEO Cho declined to discuss the tax and management rights on Monday.
The death also raised the possibility of a family war over the late Cho’s Hanjin Kal stake, though his family would likely fight to defend control of Korean Air, analysts said.
“Since it appears the late chairman left no formal will, it’s crucial for Walter Cho and his sisters who own similar-sized stakes in Hanjin Kal to avoid any family feud aimed at becoming the biggest shareholder,” said Hi Investment & Securities senior analyst Lee Sang-hun.
Asked how he would deal with growing competition in South Korea’s aviation industry, CEO Cho said the airline as been too passive in competing with fast-growing low-cost carriers and that he would adopt a more aggressive strategy.
“Now they are interfering with our (full-service) side of the business and they are over-growing the size of the market,” Cho said.
Korean Air’s operating profit fell more than 40% to 640 billion won in 2018 versus 2016, while profit at the country’s biggest budget carrier, Jeju Air Co Ltd, nearly doubled to 100 billion won over the same period, their stock exchange filings showed.
Korean Air currently operates 168 aircraft serving 124 destinations.
In October, it said it could order more wide-body jets this year, with Boeing Co 787 and Airbus SE A350 models in contention. Cho on Monday declined to specify the likely size of any order but said a purchasing decision would be made “imminently”.
Reporting by Heekyong Yang and Jamie Freed; Editing by Muralikumar Anantharaman and Christopher Cushing