SEOUL (Reuters) - Asiana Airlines’ co-CEO resigned on Thursday and its debt-ridden parent Kumho Asiana Group sought financial support from its top creditor after an accounting fiasco at the South Korean carrier threatened the group’s liquidity position.
The surprise resignation of Park Sam-koo, who also quit as chairman of the group and co-CEO of its biggest shareholder Kumho Industrial, comes after the two firms failed to get auditors’ sign-offs on their annual reports last week.
That triggered warnings of credit ratings downgrades, a sharp earnings revision for Asiana, and a massive stock-market sell-off of the two firms on Tuesday when shares resumed trading after a two-day trading halt.
Asiana’s shares jumped as much as 15.1 percent on Thursday following news of Park’s resignation but pared gains to close 2.9 percent higher, while Kumho Industrial ended up losing 2.1 percent after rising as much as 8.2 percent.
“His resignation could darken the clouds over one of South Korea’s biggest airlines as the company faces critical moments,” said Yang Ji-hwan, an analyst at Daishin Securities.
Kumho Asiana Group said in a statement that Park met the chairman of the group’s main creditor, Korea Development Bank (KDB), late on Wednesday and asked for help to normalize Asiana Airlines, the conglomerate’s flagship firm.
It said it will launch an “emergency management committee headed by vice chairman of the group to normalize our management in a short period of time and will hire a respectable person outside the company as the new chairman.”
KDB said in a statement on Thursday that it planned to work with the airline to improve its financial structure.
Asiana has already sold assets to improve cash flow and reduce debt from aircraft purchases, as it battles rising fuel costs and competition from low-cost carriers.
The carrier had to revise its accounts and disclose a bigger annual loss this week to win auditor approval for its 2018 financial statements after the auditor raised doubts about the statements. It also said its debt amounted to more than six times its equity.
Asiana’s bigger rival Korean Air Lines is also in management turmoil after shareholders removed chief executive Cho Yang-ho from its board in a landmark vote on Wednesday, making him the first founding family member of any South Korean corporate giant to be forced off a board.
The accounting fiasco comes after Asiana suffered an image setback in July when it was unable to provide meals on some flights after a change in caterer left the airline short. It prompted Park to make a public apology at that time.
The airline had two CEOs, and with Park stepping down, Han Chang-su remains its sole CEO.
Park’s elder son serves as CEO at its IT services affiliate Asiana IDT, while his younger daughter works as an executive at Kumho Resort.
“The status of junior Parks won’t change even after their father leaves the group,” a Kumho Asiana Group spokesman told Reuters.
The senior Park is the biggest shareholder of Kumho & Company, the holding company of Kumho Asiana Group, with an ownership of 31.1 percent.
Reporting by Heekyong Yang, additional reporting by Joori Roh, Cynthia Kim and Ju-min Park; Editing by Miyoung Kim and Muralikumar Anantharaman