Atlanta-based Delta Air Lines has acquired a 4.3% stake in Korean Air’s largest shareholder and said the investment in Hanjin-KAL demonstrates its commitment to its joint venture with
KAL, which was launched in May 2018.
Delta's CEO Ed Bastian said the joint venture is designed to offer the strongest network and best service connecting the U.S. with Asia and, after receiving regulatory approval, the
holding may be pushed to 10% over time.
A Reuters report noted that the acquisition gives a boost to Korean Air's management which has been seeking to thwart a challenge by activist fund, Korea Corporate Governance Improvement
(KCGI).
Should Delta decide to raise its stake to 10% in Hanjin KAL, the airline’s founding family and its allies will have a total stake of 39%, versus the 16% stake held by KCGI, the report explained.
KCGI is not amused
KCGI, which earlier this month increased its stake in Hanjin KAL to 15.98%, from 14.98% in April, said in a statement that if Delta’s investment decision intends to “simply defend the management
rights of the controlling family members, this would go against the honour and principles that it has built so far.”
The activist fund proposed Delta, backed by U.S. investor Warren Buffett, work together to eliminate inefficiencies and improve management transparency at the Hanjin Group, it said in the
statement.
The Reuters report noted that Korean Air has been plagued in recent years by a series of scandals involving its founding family members.
In April, Korean Air's CEO and chairman, Cho Yang-ho, suddenly died at age 70, just weeks after shareholders decided to end his 27-year tenure on the airline’s board, in a show of growing
shareholder activism in Asia’s fourth-biggest economy that has long been dominated by family-owned conglomerates or "cheabols".
Unclear succession
The Hanjin Group subsequently appointed his only son Walter Cho, 43, as CEO and chairman, but the company has yet to inform regulators about a definitive succession plan. He and his two sisters
have small stakes in Hanjin KAL, in which the late Cho has a 17.8% stake.
Against this backdrop, KCGI raised its stake to nearly 16%, fueling speculation about an impending ownership battle at the conglomerate.
Reuters quoted an analyst at Yuanta Securities as saying that “Delta played a role as a white knight for Hanjin”, while a comment in the Korea Herald speculated that Korean Air is “in all-out
efforts to defend its management rights” from KCGI.
Delta on way to becoming core of a global conglomerate
Delta did not disclose how much it paid for the 4.3% stake. It also did not say who it bought the stake from or when it may raise it to 10%. It also owns stakes in Grupo Aeromexico, Air France
KLM, China Eastern, Brazil’s Gol and Virgin Atlantic, and has been negotiating a stake in Alitalia.
Since launching in May 2018, Delta and Korean Air have expanded joint operations in the trans-Pacific to include more than 1,400 codeshare flights, including connections throughout Asia and the
U.S.
Additionally, Korean Air and Delta have launched cargo cooperation across one of the most comprehensive route networks in the trans-Pacific market.
Nol van Fenema