Sono International begins campaign to oust T'way Air's board

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Sono International begins campaign to oust T'way Air's board

Daemyung Sono Group, the second-largest shareholder of T'way Air, intends to gain more control of the budget airline's management.. Pictured are passengers waiting to check in for a T'way Air flight at Incheon International Airport on Jan. 22. [NEWS1]

Daemyung Sono Group, the second-largest shareholder of T'way Air, intends to gain more control of the budget airline's management.. Pictured are passengers waiting to check in for a T'way Air flight at Incheon International Airport on Jan. 22. [NEWS1]

 
Daemyung Sono Group, the second-largest shareholder of T'way Air, intends to secure control of the budget airline's management.


The construction and hospitality conglomerate’s de facto holding arm, Sono International, urged Korea's third-largest low-cost carrier (LCC) to replace its board in a letter sent to its management Wednesday. It also requested access to inspect the shareholder registry ahead of the firm's regular shareholder’s meeting in March.
 

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The move follows Daemyung Sono's aggressive expansion into the airline business. The group has created a special task force for aviation businesses and is floating the possibility of merging T'way Air with Air Premia, another LCC in which the group owns a stake.
 
"We are considering a merger in the case that we secure management control over T'way Air and Air Premia," a Sono International spokesperson told the Korea JoongAng Daily. 
 
The spokesperson added, however, that the company intends to "fulfill its shareholder agreement with AP Holdings," Air Premia's majority shareholder, which announced last October that it had no plans to sell its stake or change the airline's management.
 
Daemyung Sono acquired 50 percent stake of private equity fund JC Partners' special purpose corporation, which owns 22 percent of Air Premia, in October. The group has a call option that will allow it to purchase the remaining 50 percent after June of this year.
 
“The merger is expected to create a new airline that operates mid- to long-distance routes, such as Korea to other Asian countries as well as long-distance flights to Europe and the Americas,” the spokesperson for Sono International said. The two airlines currently do not have any overlapping routes.
 
The change in T'way Air's management “places its growth and enhancement of shareholder value as the top priority and intends to maximize these objectives,” Sono International said.
 
“T’way Air currently fails to ensure its reliability for aviation safety,” the subsidiary added, arguing that the carrier has “insufficient maintenance fees and manpower and had a high rate of corrective orders following aviation safety inspections.” 
 
It added that the airline's “brand image is being damaged due to its operational abilities assessed to be lacking by the Ministry of Land, Infrastructure and Transport, as well as having to pay the fines for the ordered corrective measures."
 
The firm requested that the appointment of new directors be added to the agenda of the next shareholder meeting, stating that a new board would establish a “stable” operation strategy for the airline.
 
Daemyung Sono recommended nine candidates for the new board of directors that includes the group’s chairman, Seo Joon-hyuk, the Chosun Ilbo reported Wednesday. Seo will reportedly not challenge the chairman position 
 
The company can have up to 12 directors on the board; currently it has seven. Four of those seven members’ terms expire in March.
 
T'way’s largest shareholder is T’way Holdings and Yerim Dang, with a combined stake of 30.07 percent as of Jan. 14. Daemyung Sono is the second largest shareholder with a combined stake of 26.77 percent through its holding company, Sono International, which owns 16.77 percent, and subsidiary Daemyung SonoSeason, with 10 percent. With only a 3 percent difference in shares, the stakeholders are likely to strongly dispute over who holds board positions.
 
Daemyung Sono Chairman Seo said in a statement that the group will use its infrastructure, both overseas and in Korea, to launch diverse products and improve customer service that will maximize T’way’s shareholder value and customer satisfaction.
 
“Our entry into the aviation industry will serve as a new growth engine for Daemyung Sono Group and make it a global leading company,” Seo said. 

BY KIM JU-YEON [[email protected]]
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