KCGI group blasts the Hanjin KAL chairman

Kim Shin-bae, left, former SK Group executive vice chairman, and Kang Sung-boo, KCGI CEO, at a press conference held at a hotel in Yeouido, western Seoul, Thursday. [YONHAP]

On the same day that the group seeking to take control of Hanjin KAL bought another 5 percent of the company, it blasted the current chairman and said it had lost faith in his ability to lead.

Cho Hyun-ah, sister of Hanjin KAL Chairman Cho Won-tae, Bando Engineering & Construction and Korea Corporate Governance Improvement (KCGI) together own 37 percent of the company, which in turn owns 30 percent of Korean Air Lines, and are working together to assume control of the business and install professional managers.

It was reported just on Thursday that Bando increased its shareholding by 5.02 percent, taking the total to the 37 percent level.

KCGI has “lost faith” in Cho Won-tae and is holding the current management accountable for the massive debt load of Korean Air Lines, said KCGI CEO Kang Sung-boo.

“Our battle is being depicted as a family feud, but we are an investor alliance,” said Kang in a press conference held Thursday in Yeouido, western Seoul.

“This is not about a conflict between siblings; it’s about a paradigm shift where management is no longer led by the owner family but a board of directors.”

Kang strongly criticized the Cho family and said it is responsible for bad investment decisions, including the former chairman’s 2014 acquisition of Hanjin Shipping.

The group’s financial situation did not improve after current Chairman Cho Won-tae became Hanjin KAL’s CEO in 2014, Kang said.

“Nothing has been done in the past year. It’s disappointing. The company recently accepted [investors’] earlier request to sell off the Songhyeon-dong property, but it’s too late. I feel Hanjin has become more arrogant after Delta [Air Lines] acquired shares. Cho Won-tae’s been regarding us as ‘just another shareholder,’” added Kang.

KCGI denied rumors that Cho Hyun-ah was making an attempt to return to management and said it will institute a rule forbidding shareholders from taking management positions.

Regarding criticism that the group’s director nominee lacks airline experience, KCGI and Kim Shin bae, former SK Group executive vice chairman and the alliance’s candidate, said that not everyone on the board needs to be experts in the field.

“[Korean Air] should transform into a future-oriented business. Buying a lot of airplanes is not everything. Why can’t heavy magazines be replaced by tablets? Why can’t it offer Wi-Fi? Candidate Kim has worked at SK Telecom for a long time. He can bring change,” said Kang.

The KCGI CEO also stressed that the private equity fund is different from the likes of New York-based Elliott as it seeks long-term returns rather than short-term gains.

“Cho Hyun-ah has publicly said she will not engage in management, but without a doubt, the alliance will appoint executives in her favor and take over the company - this is an undeniable comeback,” the company said.

It also disregarded KCGI’s plan as “vision-less and empty.”

“The airplane industry is highly vulnerable to external factors and trends. It needs experts that can read, understand change and have global connections in the field,” the statement said.

“The failure of Hanjin Shipping was provoked exactly by the likes of people suggested by the Cho Hyun-ah alliance - professional managers with a finance background that had zero knowledge in the field.”

BY SONG KYOUNG-SON, KANG JAE-EUN [song.kyoungson@joongang.co.kr]