Delta Airlines acquired a 4.3 per cent equity stake in Hanjin-KAL, the largest shareholder of Korean Air, with the hope of increasing it to 10 per cent if given regulatory approval.
The move is seen in varying light however, with the deepening partnership offering up many advantages to the two carriers in terms of their transpacific passenger and cargo networks, but activist shareholder moves and potential secessionist struggles cloud the skies back in Seoul.
“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 US with Asia,” says Delta CEO Ed Bastian.
“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,” Bastian adds.
Part of the joint venture includes Korean Air and Delta’s cargo cooperation across one of the most comprehensive route networks in the transpacific market.
Delta and Korean Air operate, what the two carriers say, it the industry’s most robust trans-Pacific joint venture, providing customers with seamless access to more than 290 destinations in the US and over 80 destinations in Asia, including the partnership’s hub at Seoul-Incheon (ICN).
Since launching in May 2018, Delta and Korean Air have strengthened cooperation by expanding joint operations in the trans-Pacific to include more than 1,400 codeshare flights, including connections throughout Asia and the US.
Delta notes the partnership is contributing to its first year-over-year growth in the Asia Pacific region since 2012, with new service launched earlier this year between Minneapolis/St. Paul and Seoul, as well as Seattle and Osaka, operated in partnership with Korean Air. Additionally, Korean Air has launched new service linking Boston with Seoul.
The joint venture builds on nearly two decades of close partnership between Korean Air and Delta, both founding members of the SkyTeam airline alliance.
But as rosy as all this sounds, analysts have highlighted there is much more to the investment than plain business growth. Analysts say it is also a visible vote of confidence for Korean Air’s Cho Won-tae (Walter), recently appointed chairman of the Hanjin Group who assumed the helm of the Korean chaebol after the death of his father Cho Yang-ho in April. Walter Cho is also chairman of Korean Air.
The Cho family owns approximately 29 per cent of Hanjin-KAL and their lack of majority control of the carrier has been under persistent attack by an activist shareholder – the Korea Corporate Governance Improvement Fund (KCGI) which has reached nearly 16 per cent of total shareholding as of May this year.
The activist shareholder’s main complaint revolves around what it says is the carrier’s under-performance due to Cho family management and the need for more independent management.
The Cho family may be set for a secessionist battle as well, as the late Cho Yang-ho held a stake of 17.8 per cent and aside from Walter, the eldest and only son there are two daughters who were given senior roles in ancillary areas: Hyun-ah (Heather) for in-flight services and Emily in marketing and Jin Air.