Hanjin and Third-Party Alliance Clash Over 'Airbus Rebate' with Rebuttals and Counter-Rebuttals... Dispute Continues

Heated Justification Battle Between Both Sides Ahead of Regular General Meeting (27th)
Will It Influence 국민연금 and Institutional Decisions?...Focus Intensifies

[Image source=Yonhap News]

[Asia Economy Reporter Yoo Je-hoon] Hanjin Group and the shareholder coalition for the normalization of Hanjin Group (shareholder coalition) have been engaged in sharp exchanges over the 'Airbus rebate allegations' for consecutive days. With the Hanjin KAL regular general shareholders' meeting (on the 27th), which is crucial for the fate of the group, just about two weeks away, the battle for justification aimed at institutional and minority shareholders is intensifying until the final moments.

On the 10th, Hanjin Group stated, "We reiterate that Chairman Cho Won-tae and the current management have no involvement whatsoever in the Airbus rebate allegations," adding, "We plan to take civil and criminal legal actions against acts that damage the honor of the current management without grounds and negatively affect the company's value."

The Airbus rebate allegations were publicized by Rep. Chae Yi-bae of the Minsaeng Party during the National Assembly Legislation and Judiciary Committee plenary session on the 4th. The core of the allegation is that former senior executives of Korean Air received rebates amounting to 18 billion KRW (14.5 million USD) during the aircraft sales contract process with Airbus.

The basis for Rep. Chae's claim is a settlement agreement reached in January between Airbus and the French National Financial Prosecutor's Office (PNF), the UK's Serious Fraud Office (SFO), and the U.S. Department of Justice. The agreement states that between 1996 and 2000, Airbus promised to pay 18 billion KRW to former senior executives during the contract for 10 A330 aircraft with Korean Air, and subsequently paid 2.4 billion KRW in 2010, 7.8 billion KRW in 2011, and 7.2 billion KRW in 2013.

Rep. Chae suspected that the 18 billion KRW received as rebates was used to create overseas slush funds by the Hanjin family and requested an investigation from Minister of Justice Choo Mi-ae. The shareholder coalition also issued a press release on the same day, stating, "This incident clearly shows why a professional management system is necessary," and criticized, "The company can no longer survive under past authoritarian leadership and secretive management."

Since then, the exchanges between both sides have been intense. Upon the allegations, Hanjin Group responded by saying, "The shareholder coalition is misleading public opinion, and this matter is unrelated to the current management," attempting to block the allegations.

Hanjin Group pointed out, "The shareholder coalition falsely claims the French PNF settlement agreement as a high court ruling, misleading public opinion," adding, "This document is a judicial public interest agreement between the prosecution and Airbus, aimed at granting immunity to Airbus, and is not a judicial ruling on facts involving third parties."

Furthermore, Hanjin Group emphasized that the current management is unrelated to this matter. They stated, "The period mentioned in the agreement is from 1996 to 2000, whereas Chairman Cho Won-tae joined in 2003, so he is completely unaware of this issue," and added, "Although Chairman Cho was not employed during that period, former Vice President Cho Hyun-ah was. Both Chairman Cho and former Vice President Cho were in the same position after 2010, the period when the payments were made."

Regarding the aircraft transactions, Hanjin Group stressed, "Korean Air underwent over 18 raids and dozens of account tracking investigations by 11 investigative agencies in November 2018, but no illegal activities related to aircraft transactions were found."

The shareholder coalition counterattacked. They said about the settlement agreement, "It is a document confirming that Airbus bribed airlines and agreed to defer criminal punishment on the condition of paying fines and other actions," and added, "This document's contents were confirmed by court rulings, and Airbus itself acknowledged and promised improvements."

Regarding the claim that Chairman Cho is unrelated, they argued, "From 2010 to 2013, when the rebates were sent, Chairman Cho was the head of the Passenger Business Division and the Management Strategy Division, directly responsible for aircraft procurement," and said, "Chairman Cho has been a registered director since 2004 and voted in full favor of aircraft procurement and borrowing, so claiming ignorance of the large rebate payments is like covering the sky with one's palm."

In response, Hanjin Group launched a counterattack. They said, "We have requested fact verification from Airbus and will conduct an internal audit," adding, "We will explain to shareholders as soon as facts are confirmed, and if any illegal acts are found, we will take all legal measures. However, we will not tolerate baseless damage to the current management's honor that negatively affects the company's value."

This tense exchange between both sides is interpreted as an effort to win the votes of institutional and minority investors ahead of the regular shareholders' meeting about two weeks away. Based on last year's shareholder registry closure date, the Hanjin KAL shareholding ratio secured by both sides is 33.45% (Chairman Cho's side) versus 31.98% (shareholder coalition), a difference of only 1.47 percentage points.

In particular, the industry is paying attention to whether this allegation will affect the exercise of voting rights by the National Pension Service (NPS), which holds about 2.9% of shares and holds the key to the management rights dispute. Earlier, the NPS Stewardship Responsibility Committee decided on the 6th to exercise voting rights at the Hanjin KAL shareholders' meeting. An industry insider said, "Both sides have been competitively acquiring shares since last year's shareholder registry closure, but there is little difference in voting rights for this shareholders' meeting," adding, "It is highly likely that this battle of justification will continue until the shareholders' meeting."

This content was produced with the assistance of AI translation services.