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Hanjin chief defends merger amid criticism

Kicker -- Asiana workers oppose merger, KCGI goes to court to stop new shares

Hanjin Group Chairman Cho Won-tae answers reporters’ questions after attending the 32nd Korea-US Business Meeting at the Federation of Korean Industries in Seoul on Wednesday. (Yonhap)
Hanjin Group Chairman Cho Won-tae answers reporters’ questions after attending the 32nd Korea-US Business Meeting at the Federation of Korean Industries in Seoul on Wednesday. (Yonhap)

Hanjin Group Chairman Cho Won-tae said Wednesday that the merger of the nation’s two largest carriers, Korean Air and Asiana Airlines, will not lead to price hikes or workforce restructuring.

After attending the Korea-US Business Meeting at the Federation of Korean Industries in Seoul, Cho told reporters, “There may be concerns about such a (monopoly),” but “there will be no (lower) customer convenience or price hikes.”

Regarding the restructuring of the workforce after the merger, he said, “We have no plans to restructure our workforce,” adding, “We will create an opportunity to embrace all employees and welcome them as a family.”

“I will do my best to ensure that no one is left behind. I will meet (the unions of both companies) as soon as possible and find a way to coexist.”

Saying it was not realistic to overcome the COVID-19 crisis without some restructuring, he acknowledged, “It is true that there are many overlapping routes and personnel when considering the size of the two companies.”

But, he added, the firm can fully utilize the overlapping personnel if it considers expansion of routes and business.

Currently, Korean Air and Asiana Airlines have about 18,000 and 9,000 employees, respectively. Korea Development Bank Vice President Choi Dae-hyun estimated at a press briefing Monday that there would be 800 to 1,000 overlapping employees after the merger.

As to whether he had any plans to respond to a three-way alliance opposing the takeover of Asiana Airlines, he said he had no such plans. The three-way alliance, consisting of activist investor KCGI, Bando Engineering & Construction and former Korean Air Vice President Cho Hyun-ah, is at odds with Cho Won-tae over control of Hanjin Group.

To the criticism that the support of KDB is a special favor, he said, “I don’t think so,” adding, “When KDB asked about my intention first, I said I could do it, and it proceeded after meeting several times and talking for a long time.”

Despite Cho and KDB’s strong willingness for the companies to merge, the process does not appear to be on course for smooth sailing.

The interests of the two firms’ labor unions are currently sharply divided, with Korean Air workers supporting the merger and the Asiana Airlines union opposing it.

On Tuesday, the Korean Air union issued a statement that it respected the decision to take over Asiana.

“We agree that the decision was made to enhance the competitiveness of the air transport industry, which is a national key industry, and to solidify the value of existence,” the Korean Air union said. “The acquisition is the best choice for maintaining employment of aviation workers.”

“The government and the management of both companies should make clear their commitment to job security for workers who are anxious about employment.”

The next day the Asiana Airlines union called for the immediate withdrawal of the merger plan, labeling the merger plan “secret collusion.”

The Asiana Airlines union issued a statement Wednesday, saying, “Because the merger of the two national airlines is a monopoly in the market and the public will bear the cost, it is prohibited by the law. But (KDB and the management) are trying to justify (the merger) by decrying Asiana as an unrecoverable company.

“We cannot help but suspect that another conspiracy and interests are involved in collusion for KDB -- just because it has a little more shares -- to push the merger, which the survival of many workers depends on.

“As KDB announced, Asiana Airlines is already a bankrupt company. But its stock price soared for several days before the announcement of the merger,” it added.

The Asiana Airlines union warned that workers will fight the merger to the end.

Later in the day, private equity fund KCGI, a shareholder of Hanjin KAL, released a statement opposing the merger plan following several similar statements over the past days.

This time, it argued that the investment agreement signed between KDB and Cho Won-tae was not valid because Cho’s collateral was insufficient.

KCGI said, “Of Cho’s 3.85 million shares, 3.26 million shares (84.32 percent) are already provided as collateral to other financial institutions and the National Tax Service, which means nothing as collateral.”

KCGI said it urgently filed for a ban on issuing new shares with the court in response to Hanjin KAL’s decision to increase the capital allocated to a third party. Third-party allocation is the way in which an entity assigns newly issued shares to a particular person.

Previously, KDB decided to invest 800 billion won ($725 million) by acquiring 500 billion won of new shares issued by Hanjin KAL and purchasing 300 billion won in exchange bonds. With 730 billion won of the total, Hanjin KAL was scheduled to fund the acquisition of Asiana Airlines by taking part in the paid-in capital increase of Korean Air.

By Shin Ji-hye (shinjh@heraldcorp.com)







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