June 29, 2018 / 6:46 AM / 18 days ago

South Korea delays decision on whether to cancel Jin Air's license

SEOUL (Reuters) - South Korea on Friday delayed a decision on whether to cancel the aviation business license of budget airline Jin Air Co Ltd (272450.KS) given the “grave impact” cancellation would have on the airline industry.

FILE PHOTO - Cho Hyun-min, a former Korean Air senior executive and the younger daughter of the airline's chairman Cho Yang-ho, arrives at a police station in Seoul, South Korea, May 1, 2018. REUTERS/Kim Hong-Ji

The Ministry of Land, Infrastructure and Transport conducted a review of whether Jin Air, an affiliate of Korean Air Lines Co Ltd (003490.KS), violated transport law by appointing a non-Korean - controlling family member Cho Hyun-min - as a board director.

Cho, 35, is a U.S. citizen and the youngest daughter of Korean Air Lines Co Ltd Chairman Cho Yang-ho. She stepped down as senior vice president at Jin Air in April after reports of inappropriate conduct at a business meeting prompted an outcry over the behavior of families running conglomerates.

“Worldwide, it is very rare that a license of a company is canceled. Also in our case, this will have a grave impact on the airline industry. There is controversy over the legality of cancellation as well,” Vice Transport Minister Kim Jeong-ryeol said at a briefing.

He said the ministry will hold a hearing and listen to the views of stakeholders including employees, and that law firms and professors have expressed mixed opinions on the matter.

Jin Air in a statement said it will sincerely cooperate with the hearing where it will express its position.

It is South Korea’s second-largest discount carrier after Jeju Air Co Ltd (089590.KS). It employs about 1,900 workers as well as over 10,000 subcontractors.

A workers’ union at Korean Air said it will protest if Jin Air’s license is canceled, which they said would threaten job security and the livelihood of workers.

Reflecting uncertainty of the airline's fate, shares of Jin Air ended down 0.4 percent on Friday whereas those of Korean Air rose 4.4 percent. The wider market .KS11 was 0.5 percent higher.

The public furore over Cho’s behavior at the business meeting prompted investigations into several of her family members, including Chairman Cho who appeared at the prosecutor’s office for questioning on Thursday.

Cho Hyun-min is a younger sister of Heather Cho who achieved global notoriety in the 2014 “nut rage” incident, when she lost her temper over the way she was served nuts in first class before takeoff from New York, eventually delaying the flight.

President Moon Jae-in has vowed to curb the power of family-owned conglomerates and improve their governance following a corruption scandal involving his impeached predecessor and business leaders including the chief of Samsung Electronics Co Ltd (005930.KS).

Reporting by Hyunjoo Jin and Heekyong YangEditing by Christopher Cushing

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