Korean Air CEO Dies Weeks After Being Kicked Off Board

Filed Under: Korean Air

It’s not a great time for aviation in South Korea.

Korea’s second largest airline, Asiana, has been in a bit of an accounting fiasco, and the company’s CEO stepped down a bit over a week ago.

Korean’s largest airline, Korean Air, has been involved in an endless number of scandals, mostly involving the Cho family. Just about everyone has heard of the “nut rage” incident involving Heather Cho, but that’s only one of many scandals. The Cho family has also been accused of embezzlement and tax evasion.

Cho Yang-ho was the CEO of Korean Air. Just weeks ago he was kicked off the board of the airline, after serving on it for 27 years. He needed two-thirds of the board’s vote in order to stay on the board, but was only able to get 64% of the vote, so barely missed the requirement.

However, he stayed on as CEO of the airline, though it’s now being reported that he has passed away.

70 year old Cho Yang-ho died Sunday in Los Angeles, according to a Korean Air statement. The cause of death wasn’t revealed in a statement from the airline, though other sources suggest that this was due to a chronic illness.

Stocks of Korean Air rose Monday morning following this news. I sort of hate to say that, though it perhaps reflects the sentiment that exists towards the family, as they’re not very well liked, to put it mildly. They’ve also been doing a pretty awful job running the airline.

Cho directly owned 17.8% of Hanjin Kal, which is the holding firm that owns Korean Air. His family together owns a 29% stake. So with his passing, there are a lot of questions about what this means for the airline and his shares in the company, given just how much of the company he owned.

It also raises the question of who will take over his position. Rather than trying to find the best person for a particular job, Korean Air has long been run like a family business, with Cho’s unqualified kids getting jobs at the airline.

Recently an activist fund increased their stake in the airline to about 13.5%, hoping to fix mismanagement at the company.

Hopefully this situation finally prompts some positive change in leadership at the company, though I wouldn’t count on it, given just how many shares the Cho family owns.

Comments
  1. Apparently the issue will be how many shares of the group will be retained. At 17% of the holding company with the 50% inheritance tax may force them from controller by force sale of half the shares unless settled another way.

    I wonder if chaebols can be handled via trusts under S.Korea laws.

  2. @Simon Korea actually don’t have something equivalent to trusts (if I understand “trust” correctly).

    @Ben Actually it is very unclear whether the Cho family as a whole can maintain “largest shareholder” status of Korean Air/Hanjin Group. We might soon see Korean Air out of Cho’s hand and Asiana Airline out of Park’s hand. It better be, especially since next generation Cho are even worse…

    One slight nitpick : it’s capitalized “Hanjin KAL” as KAL stands for Korean Air Lines. (KE’s official English name is still Korean Air Lines Co., Ltd. even when their brand has changed to Korean Air three decades ago)

  3. And remind me why Delta inked a deal with Korean instead of investing in its Asia–Pacific operations? Korean has corporate management and governance issues. It has horrible lounges, the business-class product is horrible inconsistent, and the first-class product is basically unaccessible to Delta customers. Shame on Delta. Intra-Asia out of Tokyo-Narita worked just fine.

  4. Does that mean that “nut rage” lady is the next CEO. KE seems to be run like a family business, even though it’s not.

  5. @FNT Delta Diamond
    Delta is a big reason why Korean Air is still kind of “decent” despite all the management woes – Delta actually had one seat at the board of directors at Korean Air until mid-2000s. Delta also helped KE set up safety management system after series of accident in late 1990s, to make KE worthy partner of DL (at Skyteam). It only makes sense for Delta to reap benefits for what it did to KE. (And it is a lot cheaper than basing expensive planes just for small-scale NRT operations, and it wasn’t like DL could compete against JL or NH ex-NRT…)

    @James Osborne
    It would be brother of “nut rage” lady. Not that it is necessarily a good news for KE.

  6. Cho Yang Ho has a son who will likely takeover. Unlike his sister’s, Walter Cho didn’t do dumb stuff like them.

    @FNT Delta Diamond
    DL did everything right. It cost too much to maintain NRT. They even leverage MU to squeeze KE more than ever.
    KE lounges IMO is on par with SkyClub, new J seats on 748/77W are much better now.
    The lack of F redemption is more Skymiles problem with everyone else.
    TPAC will return if DL cares, SIN BKK TPE HKG MNL etc. should soon fly from SEA on 350 (given they are economically feasible)

  7. I might be in the minority here but I am sympathetic to his daughter for the “nut rage” scandal. Asian airlines pride themselves in delivering the best service and naturally there is a procedure for everything, including how the nuts should be served – every detail matters! As a VP of cabin products, she had every right to discipline the staff for failure to follow procedures. For passengers that are paying top dollars to sit upfront, sometimes 10x-20x more than economy, service should be impeccable. She might have over done it by having the plane pushed back to the gate but the underline cause is not all that unreasonable. Korean Air used to be one of the best and have since fallen from grace due to this type of service lapses, so for her to want to do something about it, it seem right to me! It’s sad that something like this spun out of control into a scandal…

  8. “Kicked off board”

    Dam my quick reading of headlines, I clicked expecting to see an hilarious story about a CEO being kicked off one of his airline’s planes – and was amazed I hadn’t heard it before. The truth was a lot more boring….

  9. @Eskimo He has done a lot more dumb things than his sisters…including hit-and-run against a police officer…

    @ Will – only that Heather Cho completely forgot that the procedure changed to “no nut plates” before the incident – due to passenger allergy issues. She got enraged when she was proved wrong…

    @Simon – interesting differences between Korea and US – my understanding of US Law is quite basic too…

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