Court May Decide on New Share Issuance Ban as Early as 30th
San-eun and Hanjin Kal Deny KCGI's False Claims
Both Companies' Unions Express Opposition to Merger
As Korean Air's acquisition of Asiana Airlines is underway, on the 17th, Korean Air and Asiana Airlines passenger planes are parked behind the construction site of the 4th runway at Incheon International Airport. 2020. 11. 17
[Asia Economy Reporter Kangwook Cho] The court ruling that will decide the fate of Korean Air's merger with Asiana Airlines is expected as early as today (the 30th). As the future of the domestic aviation industry hangs in the balance, attention is focused on the court's decision.
The Seoul Central District Court Civil Division 50 (Chief Judge Seungryeon Lee) will deliver a verdict on the provisional injunction request filed by Grace Holdings, an investment purpose company under KCGI, against Hanjin KAL to prohibit the issuance of new shares, as early as the 30th and no later than the 1st of next month. Since the payment date for the third-party allotment capital increase of Hanjin KAL to the Korea Development Bank (KDB) is on the 2nd of next month, the decision must be made by the 1st at the latest.
Earlier, KCGI filed a provisional injunction seeking to nullify the issuance of new shares related to Hanjin KAL's third-party allotment capital increase involving KDB. KCGI argues that under the current structure, the acquisition of Asiana Airlines is possible through the issuance of non-voting preferred shares or loans alone.
The court concluded the hearing on the provisional injunction on the 25th and has begun a full legal review. The court identified the key issues in this case as the legitimacy of the purpose of the new share issuance and whether alternatives to the new share issuance exist.
Since the payment date for the third-party allotment capital increase of Hanjin KAL to KDB is on the 2nd of next month, the decision must be made by the 1st at the latest. If the court grants the provisional injunction, Korean Air's acquisition of Asiana Airlines is likely to be nullified.
For this reason, KDB has been raising its voice daily, emphasizing that the integration is necessary for the survival of the aviation industry. Especially with Japan reportedly preparing for airline consolidation, there are concerns that if Hanjin KAL's capital increase fails, the entire aviation industry could collapse.
In fact, in Japan, discussions about the merger of the two major airlines, All Nippon Airways (ANA) and Japan Airlines (JAL), have been circulating. However, since the government-led restructuring that merges Korean Air and Asiana Airlines is starting first, similar discussions are emerging in Japan. The merger talks between ANA and JAL flared up significantly back in 2009.
Nevertheless, controversy remains in the market. There are suspicions that KDB's participation in Hanjin KAL's capital increase is aimed at protecting Chairman Cho Won-tae's management rights. While the purpose of restructuring the aviation industry is understood, questions arise as to why Hanjin KAL specifically.
Chairman Cho stated on the 16th, when he first announced the plan to sell Asiana Airlines within the Hanjin Group, that a capital increase in Hanjin KAL was unavoidable to maintain the Hanjin Group's holding company system.
Also, during an online briefing on the 19th, he urged, "Please view the situation objectively and calmly without political bias," emphasizing, "Although I am aware of suspicions of chaebol favoritism, this is a choice that cannot realistically be avoided."
Members of the Korean Air Union and the Asiana Open Pilots Union, among others from the Aviation Industry Labor Federation, are holding a picket protest on the 25th in front of the National Assembly in Yeongdeungpo-gu, Seoul, demanding job security for aviation industry workers. Photo by Kim Hyun-min kimhyun81@
If Dismissed, 'Integration' Accelerates... If Granted, Acquisition 'Fails'
On the 23rd, KDB stated in a press release that it must participate as a shareholder in Hanjin KAL to faithfully perform the role of monitoring the sound and ethical management of the Hanjin Group.
To monitor whether the Hanjin Group's promises, such as the full employment succession of Asiana Airlines employees, are properly fulfilled, KDB must secure means to check the management of Hanjin KAL, including Chairman Cho.
On the 26th, KDB reiterated that the aviation industry restructuring plan is being promoted while adhering to the three principles of restructuring: responsible roles of major shareholders, sharing of pain by stakeholders, and preparation of sustainable normalization measures, aiming for the integration of the two major national airlines.
The Asiana Airlines labor union and the Asiana pilots' union are reportedly preparing criminal lawsuits against Chairman Cho. They claim that his repeated remarks suggesting that Asiana Airlines would soon go bankrupt, while emphasizing the necessity of Korean Air's acquisition of Asiana Airlines, have seriously harmed the company's existence, and plan to sue him on charges including intimidation and threats.
KDB has publicly requested dialogue with the Asiana Airlines labor union, the Asiana Airlines pilots' union, and the Asiana Airlines Open Pilots' Union. However, in response, the joint countermeasure committee of the four unions of Asiana Airlines and Korean Air argued that this is merely an attempt to build justification ahead of the court's provisional injunction decision.
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