[Deputy Editor's Column] Asiana Airlines, a Comprehensive Trust Crisis

[Asia Economy Reporter Lim Jeongsu] "The bigger problem is that the management of Asiana Airlines and the publicly announced management situation cannot be trusted." This is the common assessment among business circles and capital market insiders who are watching the tense standoff between the creditors (including the Korea Development Bank) and the HDC Group over the sale and acquisition of Asiana Airlines with concern. Since the HDC Group and the Mirae Asset Daewoo consortium agreed to acquire Asiana Airlines last December, a series of incidents casting doubt on management transparency have emerged over the past five to six months.

Samil Accounting Corporation, which conducted the audit, expressed an "adverse" opinion on Asiana Airlines' internal accounting control system in its 2019 audit report. While it gave an "unqualified" opinion on the financial statements, it evaluated that the internal accounting control system, a kind of accounting process, was not properly established. In response, the HDC Group pointed out that even the reliability of the financial statements, which is the contractual standard, is questionable.

The HDC consortium also hesitated to disclose related materials when deciding on matters that could have a significant impact on management conditions. In April, Asiana Airlines notified the consortium of plans for an emergency additional borrowing of 1.7 trillion won, amendments to the articles of incorporation, and the convening of an extraordinary shareholders' meeting. Subsequently, without prior consent, the board of directors approved the additional borrowing the next day and decided to support insolvent affiliates with a total of 140 billion won. The consortium claims that despite sending about 11 official letters over two months, it did not receive reliable and sufficient materials from Asiana Airlines.

Recently, suspicions have arisen regarding the misuse of the four major insurance premiums related to employee health, the National Pension Service, and employment. Asiana Airlines deducted insurance premiums from employees' monthly salaries, but the relevant institutions did not receive the premiums. The labor union claims that the insurance premiums withheld from employees' salaries without proper payment to the institutions amount to 12 billion won. Asiana Airlines maintains that since the government deferred the payment of insurance premiums, deducting and accumulating the premiums monthly prevents a sudden increase in the burden on employees when the deferred premiums are collected all at once later.

The management uncertainty caused by the COVID-19 pandemic is an uncontrollable unforeseen variable. If HDC's intention to acquire is firm, the only option is to decide on sharing the risks with the creditors at the negotiation table. However, uncertainty due to lack of management transparency is difficult to resolve through negotiation and can act as a trigger for the failure of the sale. The current crisis facing Asiana Airlines is not solely caused by COVID-19. The market defines it as a "comprehensive trust crisis."

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