"Asiana Airlines' Lawsuit Over Unfair In-Flight Meal Subsidy Fine Heads to Supreme Court"

The Supreme Court will review the appeal filed by Asiana Airlines against the Fair Trade Commission's imposition of a fine exceeding 8.1 billion won.

According to the legal community on the 25th, Asiana Airlines recently submitted a notice of appeal to the Seoul High Court Administrative Division 6-1 (Presiding Judge Hwang Ui-dong), which ruled in favor of the Fair Trade Commission in the lawsuit seeking cancellation of the corrective order and fine payment order. The appeal process for disputes against Fair Trade Commission decisions proceeds through two levels (Seoul High Court and Supreme Court).

Former Kumho Asiana Group Chairman Park Sam-gu established Kumho Express (formerly Kumho Holdings) in 2015 to pursue business normalization through acquiring affiliates. The following year, he proposed to several companies a plan to transfer Asiana Airlines' exclusive in-flight meal supply rights (for 30 years) on the condition of acquiring Kumho Express’s convertible bonds (BW).

Subsequently, Asiana Airlines transferred the exclusive in-flight meal business rights to Gate Gourmet Korea (GGK), a joint venture established with the Gate Group, and the Gate Group acquired 160 billion won worth of BWs interest-free. However, since there was only one in-flight meal supplier, the so-called 'in-flight meal crisis' occurred in 2018, when a large number of in-flight meals for Asiana Airlines were not supplied.

The Fair Trade Commission judged that Kumho Express enjoyed a benefit worth approximately 16.2 billion won by acquiring interest-free BWs below the normal interest rate. Furthermore, it stated, "Regarding the in-flight meal business, other affiliates within the Kumho Asiana Group were unfairly supported," and imposed a fine of 8.147 billion won, which is half of the violation amount, on Asiana Airlines along with a corrective order.

At the end of last month, the Fair Trade Commission said, "Although Kumho Express was in poor financial condition and had difficulty raising additional funds, the BW acquisition contract was possible due to this in-flight meal supply contract," and judged that "Asiana Airlines provided economic benefits by refusing more favorable in-flight meal transaction terms and supporting Kumho Express’s BW issuance." "Thanks to the contract, Kumho Express and former Chairman Park were able to strengthen their group control, and Kumho Express enjoyed favorable competitive conditions in the passenger transportation market, raising concerns about harming fair trade."

During the trial, Asiana Airlines argued, "Since former Chairman Park made contracts mainly with those from the Group Strategic Management Office, the plaintiff, who is merely a victim of breach of trust, should not be held responsible."

The Seoul High Court Administrative Division 6-1 ruled in favor of the Fair Trade Commission. The court at the time stated, "If this in-flight meal contract had not existed, Gate Group would have had no reason to proceed with the BW acquisition contract with Kumho Express," and "It is fully possible to recognize Asiana Airlines’ intention to support Kumho Express and former Chairman Park."

Moreover, the court rejected Asiana Airlines’ claims, stating, "The entire process was involved and led by former Chairman Park, who was the plaintiff’s 'CEO' at the time, and the person who led the contract signing was also an executive in charge of the plaintiff."

Meanwhile, former Chairman Park was sentenced to 10 years in prison in the first trial of a criminal case for unfairly supporting his personal company using affiliates and embezzling company funds amounting to around 300 billion won. Park, who is undergoing an appeal trial, was released on bail in January.