How long corporate partnership continues

Delta Air Lines has purchased a 4.3 percent stake in Hanjin-KAL, the holding company of Hanjin Group that owns Korea’s flagship carrier Korean Air.

In addition, the U.S. carrier has vowed to increase its stake to 10 percent over time to become the company’s third-largest shareholder.

Hanjin’s owner family members, who hold a 28.93 percent stake in Hanjin KAL, seem to be happy with the investment by its long-time partner as they have struggled to thwart challenges from Korea Corporate Governance Improvement (KCGI).

The homegrown activist fund, which owns a 15.98 percent stake, has tried to improve the governance and management of the company and its subsidiaries.

Delta and Korean Air operate a highly-profitable trans-Pacific joint venture, which provides customers with seamless access to almost 300 destinations in the United States and over 80 in Asia.

Hence, observers point out that Delta could act as a “white knight” for Hanjin’s top management headed by the group’s new chief – Chairman Cho Won-tae.

Delta CEO Ed Bastian confirmed such a belief.

“Together with the team at Korean Air, we have a vision to deliver the world’s leading trans-Pacific joint venture for our shared customers, offering the strongest network, the best service and the finest experience connecting the U.S. with Asia,” he said in a press release.

“This is already one of our fastest-integrating and most successful partnerships, and experience tells us this investment will further strengthen our relationship as we continue to build on the value of the joint venture.”

‘But baby, it ain’t over till it’s over’

However, KCGI is apparently not giving up.

In a statement, it asked Delta to join hands with the fund so as to eliminate inefficiencies and improve management transparency at Hanjin.

And some observers point out that it is not 100 percent certain that Delta will support Hanjin Group, which has suffered several scandals involving members of its owner family.

They take the example of Schindler Group, the Swiss lift manufacturer that closely cooperated with Hyundai Elevator. After years of collaboration, the former turned its back on the latter.

In 2006, Schindler became the second-largest stake in Hyundai Elevator to maintain a good relationship. However, the honeymoon was short-lived as the Swiss company opposed Hyundai’s attempt to buy a large-sized builder in 2010.

Most watchers agree that the investment by Delta in Hanjin is bad news for KCGI and that’s why Hanjin KALl’s share price plunged.

On the belief that Delta buying shares will strengthen the Hanjin owner family’s grip on the group, investors who requested a better governance structure of Hanjin seems to be selling off their shares.

In the business world, however, anything can happen. Nothing is promised because a sweet friend of yesterday may become a great enemy of tomorrow.

In other words, one should not presume to know the outcome of any conflict that is still in progress. He or she should wait to see how it’s really going to turn out.

“We cannot say for sure that the Cho family has achieved a victory against KCGI. There are still many issues,” a Seoul analyst said.


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