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ITSTours
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Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 3:43 am

At first I would post this in the Korean Aviation Thread, but as this is an ongoing and developing issue, I will create a separate thread for this.

Background:
The former owner of Hanjin Group, Cho Yang-ho (the first son of the founder Cho Joong-hoon), passed away this April.

The second child, Cho Won-tae or Walter Cho, succeeded him and became the chairman and CEO of Korean Air.

At the time, the oldest child Cho Hyun-ah or Heather Cho had been kicked out of the company (due to the Nut Rage). Emily Cho, the third child and the Water Rage, had resigned as well, for the incident as well as for the Korean law that does not allow a single foreigner on the airline board. Emily Cho is a US citizen.

Each of the three children owns fairly similar amount of Hanjin KAL shares. Won-tae 6.52%, Hyun-ah 6.49% and Emily 6.47%. Hanjin KAL is the parent company for Korean Air, Jin Air, and other Hanjin-owned companies such as hotel management. In addition, Lee Myung-hee, the mother of the children, has 5.31%.

Meanwhile KCGI, a private equity fund and the biggest threat to the Cho family, owns 17.29%. Delta Air Lines owns 10%, and Bando Engineering & Construction owns 6.28%. Korean National Pension Service owns 4.11%. It is assumed that the DAL shares are friendly to Cho family, but Bando one is unknown.

Image

legend:
한진칼 Hanjin KAL
조원태 Cho Won-tae or Walter
조현아 Cho Hyun-ah or Heather
조현민 Emily Cho
이명희 Lee Myung-hee

Emily returned to the Hanjin KAL board this June. She was not accused by the prosecutor for the Water Rage. She still cannot be a board member of an airline, but the parent company seems okay with it. Hyun-ah (and the mother) on the other hand was found guilty for smuggling charge and is not yet on the board.

Development:

A few days ago, Cho Hyun-ah accused Cho Won-tae of ignoring the father's will, which was to manage the group together in peace. But as she has no seat in the board, Hanjin KAL simply dismissed her statement saying the company is only following the legal procedure.

Later news revealed that Hyun-ah got furious after Won-tae replaced the board members close to Hyun-ah with the Won-tae's aides, and for the Hanjin KAL's plan to sell off the hotel business. Given that the hotel business is losing a ridiculous amount of money (including the LA Wilshire Grand) it is reasonable to sell that off, but Hyun-ah was closely related to the hotel business. She was the CEO of KAL Hotel Network before the Nut Rage.

Climax:

Cho Won-tae had a fight with his mother for the news that claimed that the mother agree with the Hyun-ah's accusation. He cracked a vase and destroyed the window, hurting his mother (image not shown). Lee Myung-hee asked for a protection.

Image

The family feud keeps aggravating; not only legally and financially but also physically. It is even speculated that KCGI can ally with Hyun-ah and mother to overthrow Won-tae dominance (not very likely imo but certainly possible with their shares). I will continue to post the development as this is the craziest Chaebol feud currently ongoing in Korean aviation (or in Korea generally)
 
HolyMackerel62
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 2:19 pm

I'd like to add some details.

Hanjin-KAL at the moment has an okay airline business in Korean Air that can turn a profit. But their D/E ratio is over 800% which is ridiculous and not good for the price of their shares and the shareholders. The reason for this is that on top of the fact that an airline is a debt-heavy business, Hanjin (while being lead by the late Cho Yang-ho) made some poor decisions including acquiring Hanjin Shipping (now bankrupt so, the reason why that is bad is obvious) and the aforementioned hotel business with the Wilshire Grand taking a lot of (debt) money to build and right now losing money.

With all that and the members of the Cho family getting into all types of scandals, KCGI (an activist investment fund) has bought a lot of shares and is making a lot of noise. Of course, it is impossible to know the thoughts of KCGI CEO Kang Sung-boo. Whether he wants to truly improve the business long-term or pump up the stock prices short-term by perhaps a change in Hanjin leadership and then divest for a tidy profit. But this has compelled Cho Won-tae/Hanjin-KAL to promise to reduce its D/E ratio to under 400% which probably means selling off parts of Hanjin that are not airline-related and using the proceeds to pay off some debt.

The issue now is it seems Walter Cho (second child) wants to (completely understandable to me) right this ship without his two sisters, Heather (first child) and Emily (third). There are 2 issues, one is the will of the father Cho Won-tae (still causing a mess beyond the grave it seems) that seems to want all 3 children to participate in the governance of the Hanjin group, and the other is the fact that Cho Won-tae left his shares to his family so the children all have roughly 6.5% each and the mother/widow Lee Myung-hee has 5.3%. And surprise, what is happening in March next year? The annual shareholders' conference, and what is on the agenda? Voting for current Hanjin-KAL CEO Walter Cho to continue in his role or not.

So it is sizing up to be a civil war between Walter Cho and Heather Cho to get the votes needed by March. It is basically the Kingsmoot from GoT really. (Has all the family drama and moral depravity of the fantasy version I think).

So to organise the field of play:

Walter - 6.52%
Heather - 6.49%
Emily - 6.47%
Mother - 5.31%

KCGI - 17.29% (Could see them going to 20%)
Bando Group (through affiliated subsidiaries) - 8~9% (They bought more since the last post, a complete wildcard, no one is sure what they want)
Delta - Roughly 10% (Assumed to be pro-Walter, interesting to see if they buy more shares to help, up to 15% maybe?)
Korean National Pension Service (so basically the Korean government) - 4.11% (Not happy with the situation obviously, elections for the legislature are next year so don't want anything bad to happen)

So, in conclusion, this is a big mess and nobody in Korea likes anybody that is involved.
 
HJM
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 3:57 pm

Someone should create a "Korean drama" reality show from all this. Certainly all the characters for drama are in place.
 
SteelChair
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 4:14 pm

This reminds me slightly of the Ford saga after WW2 when the wife of HF1 and the wife of Edsel combined their shares (combined they had more than HF1) to force out HF1 and install the young HF2 in his place, who then cleaned house and installed the Whiz Kids.
 
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LAX772LR
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 7:55 pm

I'm sure I'll get flamed for this, but this is why I could never take this airline seriously in terms of safety(potential), and at all costs avoid the hell out of them... even though it's the immunized partner of my primary carrier.

(P.S. before anyone says it, yes I'm aware their "service" is top notch; that has nothing to do with what I just said)
I myself, suspect a more prosaic motive... ~Thranduil
 
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AirAfreak
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 10:35 pm

HJM wrote:
Someone should create a "Korean drama" reality show from all this. Certainly all the characters for drama are in place.



“The Good Witch” is a Korean Drama that includes a scene where the evil daughter of a large Korean Airline Company forced a flight attendant to bow her head and kneel toward the ground; where she poured a hot bowl of ramen noodles on top of the flight attendant’s head. She also framed her father, the airline’s CEO, with a money-laundering scandal; her attempt to avoid her father passing the title of CEO to her younger brother so she could be the new CEO instead! She drugged employees whom betrayed her, locked them into a remote cabin home; and then tried to murder them by setting the house on fire. I won’t reveal anything else, but I recommend it.
Korean Air | Excellence in Flight.
 
TYWoolman
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Dec 29, 2019 10:46 pm

I wonder what Delta thinks of this! I am sure they will never comment publicly about it.
 
ITSTours
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Re: Korean Air / Hanjin Group family feuds development thread

Mon Dec 30, 2019 5:00 am

Today, Cho Won-tae and Lee Myung-hee jointly announced their reconciliation and a public apology.
https://www.hankyung.com/economy/article/201912300230g (Article in Korean)
 
SteelChair
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Re: Korean Air / Hanjin Group family feuds development thread

Mon Dec 30, 2019 3:57 pm

Those pictures seem to indicate people who are under enormous stress. Look closely at their faces....the pale, withdrawn, stares.. They almost look like prisoners of war, or as if they are suffering from combat fatigue.
 
ITSTours
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Re: Korean Air / Hanjin Group family feuds development thread

Sat Feb 01, 2020 2:37 am

Now official: KCGI, Bando and Cho Hyun-ah (Heather Cho the Nut Rage) form a partnership, hoping to oust Cho Hyun-tae (Walter Cho the Vase Rage) the current CEO.

Hanjin KAL ownership:
KCGI:17.29%
Heather: 6.49%
Bando: 8.28%

Total 32.06%, and they are the current largest shareholder.

KCGI alliance promised that either of three will not participate in management. Instead they will appoint a "professional manager" (meaning a non-family CEO) and will turn Hanjin KAL as more of a board-managed corporation.

Walter owns 6.52%;
Emily Cho (the Water Rage) owns 6.57%;
and Lee Myung-hee, the mother of the troubled siblings, owns 5.31%.
Relatives and other related parties (assumed to be Walter allies) own 4.15%.
Delta Air Line owns 10%, Korean National Pension Service owns 4.11% and and Kakao owns 1%.

It is typically assumed that Delta is on Walter's side, but who knows?
Emily and the mother have not made the decision yet.
If either Emily or Lee Myung-hee supports Heather, then Walter will certainly lose the power.

Will Walter Cho be able to stay as a CEO? Or the KCGI alliance will manage to kick him out? It is a developing story.
 
Dieuwer
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Re: Korean Air / Hanjin Group family feuds development thread

Sat Feb 01, 2020 3:06 am

Perhaps KCGI, Bando and Delta should band together. Among them, they only need another 10% to be in total control. I’m sure those three “business oriented “ partners can come to an agreement on how to proceed in the best interest of KE.

In this article there are some good graphs to depict the possible voting combinations: https://www.moodiedavittreport.com/batt ... ted-twist/
 
ITSTours
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Re: Korean Air / Hanjin Group family feuds development thread

Tue Feb 04, 2020 9:32 pm

Lee Myung-hee (Mother) and Emily Lee Cho (Youngest sister) announced that they are supporting the current CEO Cho Hyun-tae.

Image

Now both sides got similar stakes. The fight will be intense.
 
Dieuwer
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Joined: Tue Dec 26, 2017 6:27 pm

Re: Korean Air / Hanjin Group family feuds development thread

Tue Feb 25, 2020 9:23 pm

Delta increases stake in KE to 11%, positions itself for battle at the March 24 shareholder meeting.

http://www.koreaherald.com/view.php?ud=20200224000680
 
IADCA
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Joined: Mon Feb 26, 2007 12:24 am

Re: Korean Air / Hanjin Group family feuds development thread

Tue Feb 25, 2020 9:28 pm

The fact that Nut Rage lady is one of the options here and anyone supports her shows that the shareholders are just as blind as the management. Can't say I'm shocked that she's the sort of person who would manage to spark an ugly public family feud over what is essentially an enormous pile of money, however.
 
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LAX772LR
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Nut Rage heiress fails in bid for control of KE/Hanjin

Fri Mar 27, 2020 8:13 pm

Nut Rage brat failed to take Hanjin from her brother, who himself was backed by DL and others in the Korean government.

Image

https://www.channelnewsasia.com/news/as ... e-12583126

KE's in likely the biggest crisis of its existence, with employees on unpaid leave, traffic plummeting, an unclear fleet plan, and competitors desperate to fight over scraps. Not sure how (or even truly if) anyone believed that she could lead them out of this.
Last edited by LAX772LR on Fri Mar 27, 2020 8:15 pm, edited 1 time in total.
I myself, suspect a more prosaic motive... ~Thranduil
 
ITSTours
Topic Author
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Mar 29, 2020 12:44 pm

Yep. They failed at the initial attempt.

They will most likely try again. KCGI and Bando have greatly increased the ownership stake. KCGI even suggested Delta to sell their stake (I don't think Delta will do so). This will be a long-term fight.
 
x1234
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Re: Korean Air / Hanjin Group family feuds development thread

Sun Mar 29, 2020 12:49 pm

The only good thing about KE is its network serving every major city in East & SE Asia & South Asia (DEL/BOM/TLV/DXB/BKK, etc.) With this downtime DL management should be in charge of KE and changing their J class to 1-2-1, the new industry standard. First class is overpriced and outdated.

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