Hanjin Kal 180640.KS, owner of Korean Air Lines 003490.KS, is expected to bar some members of the carrier’s founding family from managing some affiliates as it consolidates Korean Air with Asiana Airlines 020560.KS, a state bank said.
State-run Korea Development Bank (KDB) is investing 800 billion won ($724 million) to take an 11.9% stake in Hanjin Kal.
KDB Vice President Choi Dae-hyun told a news conference that Korean Air’s founding family had “decided not to participate in the management of aviation-related affiliates.”
Korean Air, whose founding family has been dogged by questions about their behaviour, said on Monday it would spend 1.8 trillion won to become the biggest shareholder in heavily indebted Asiana.
The move marks the biggest shake-up in South Korean air travel since Asiana was set up in the late 1980s. It is also international aviation’s first major consolidation since the COVID-19 pandemic hammered the travel industry.
Hanjin Kal and agencies, including KDB, signed an agreement on Tuesday that included clauses to strengthen oversight at the parent firm, according to KDB and a regulatory filing by Hanjin.
Korean Air’s founding family has faced governance questions since Heather Cho, the sister of the carrier’s chief executive, delayed a flight in 2014 because she was angry at the way she was served nuts.
Another sister, Emily Cho, was investigated in 2018 after throwing a drink at two business meeting attendees.
Both quit executive posts in the airline and affiliates after the incidents. Emily Cho has since taken up a new post.
The agreement with KDB has clauses that include handing KDB responsibility for naming three outside directors and members of the audit committee and giving the bank the right to prior consultation and consent on major management decisions.
Analysts say that bringing in KDB as a shareholder could help resolve an ongoing management dispute between Walter Cho, who is the chairman of Hanjin Group and chief executive of Korean Air, and the activist fund KCGI, Hanjin Kal’s largest shareholder.
Some shareholders might also sell their stakes in Hanjin as a result of the latest deal, they added.