May 9, 2018 / 1:17 AM / 2 months ago

South Korea's Jin Air shares slide on concerns of license cancellation

SEOUL (Reuters) - Jin Air Co Ltd (272450.KS), a budget affiliate of Korean Air Lines Co Ltd (003490.KS), saw its shares tumble as much as 9 percent on Wednesday on concerns it may lose its license over the board appointment of a non-Korean member of its controlling family.

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 South Korean airline group is already under fire after a daughter of its chairman allegedly threw water at an attendee of a business meeting, reigniting public anger at the bad behavior of families controlling the country’s biggest conglomerates.

The incident involving Cho Hyun-min, who has since stepped down as executive at Korean Air and Jin Air, sparked probes into her family and its businesses by various government agencies.

On Tuesday, TV channel KBS cited unidentified sources as saying the transport ministry last week discussed whether to cancel Jin Air’s license. The discussion followed the discovery that Cho had been a registered board member despite being a U.S. citizen, in violation of transport law, KBS said.

A transport ministry official told Reuters that the ministry is considering cancelling the license, but that nothing has been decided. The ministry, in a statement last month, said it would consider taking legal and administrative measures against Jin Air if it found any wrongdoing after initial reports of Cho’s citizenship.

A spokeswoman for Jin Air said the company is cooperating with the ministry’s investigation and declined further comment.

“The chance of license cancellation is low, but even in such a case, this will not have a major impact on Korean Air which can take back planes it has leased to Jin Air,” said Joseph Kim, a chief consultant at Seoul Aero.

“But this is a shame, and a blow to investors of Jin Air, which was only listed in December,” he said.

Cho and older sister Heather Cho, who was jailed for delaying a flight after objecting to the way nuts were served, no longer hold any positions at Korean Air, Jin Air or affiliates.

“I see the possibility of actual license cancellation really, really low,” said analyst Park Kwang-rae at Shinhan Investment. Nevertheless, such a penalty could create job instability for anyone related such as tour operators, he said.

“The problem is that since literally everyone is watching what the group does about such incidents, every little twist could see investment sentiment deteriorate,” Park said.

Jin Air's share price ended down 4.1 percent in a flat broader market .KS11 on Wednesday. Shares of its biggest shareholder, Hanjinkal (180640.KS), were down 5.0 percent, while those of Korean Air were up 0.3 percent. Among rivals, Asian Airlines Inc (020560.KS) was up 3.7 percent and Jeju Air (089590.KS) was up 3.1 percent.

Reporting by Joyce Lee Hyunjoo Jin and Dahee Kim; Additional reporting by Jamie Freed; Editing by Christopher Cushing

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