Delta Air buys 4.3% stake of Hanjin KAL

Delta Air Lines acquired a 4.3 percent stake in Hanjin KAL, joining the embattled Cho family in the battle to keep control of Korean Air.

Delta’s stake in Hanjin KAL, the largest shareholder of Korean Air, will likely help the family retain control after the death of former Chairman Cho Yang-ho and as the group faces a challenge by local activist hedge fund Korea Corporate Governance Improvement (KCGI).

The U.S. airline giant said its investment was intended to strengthen its partnership with Korean Air, while declining to specifically mention its stance on new Chairman Cho Won-tae, son of the deceased patriarch.

Analysts expect Delta to align with the Cho family because of the deep business ties the two companies have established.

“The investment demonstrates Delta’s commitment to the success of its joint venture with Korean Air and the customer benefits, market positioning and growth opportunities the partnership enables,” Delta Air Lines said in a statement.

Combined with the 28.93 percent holdings of Cho family members, the shares in favor of the current management now stand at 33.23 percent.

On the opposing side, KCGI holds a 15.98 percent stake in Hanjin KAL while the National Pension Service (NPS) has 4.1 percent shares.

The state pension operator has a dubious view of the Cho family following a series of scandals involving tax evasion and assault. In March, the NPS voted to oppose the re-election of Korean Air Chairman Cho Yang-ho as a director of the airline.

Delta said that it “intends to increase its equity stake to 10 percent over time as an extension of its partnership with Korean Air.”

“This is already one of our fastest-integrating and most successful partnerships, and experience tells us this investment will further strengthen our relationship as we continue to build on the value of the joint venture,” Delta CEO Ed Bastian said in a separate statement.

The airlines formed a joint venture in May 2018 to expand joint operations in the trans-Pacific to include more than 1,400 codeshare flights.

KCGI has kept upping the ante by launching a series of lawsuits against the airline.

Earlier this month, the KCGI criticized Cho Hyun-min’s return to management at Hanjin Group and said it would send a letter to the board of the group’s holding company asking why her return was necessary.

Cho Hyun-min is the second daughter of the deceased Cho who came under fire for abusive behavior after throwing a drink at people from an advertisement agency.

It also requested access to Hanjin Kal’s records of big loans taken out late last year, saying the loans were unnecessary.

The fund also called on Hanjin to form an independent board consisting of outside directors.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]