Chairman Cho Won-tae of Hanjin Group poses for a group photo with Korean Air freshmen employees at a commencement ceremony of a Korean Air freshmen employees’ orientation class. (Photo: Hanjin Group)

The Hanjin Group came up with a reform plan to boost the transparency of group management, make an improvement to its financial structure and increase its competitiveness in core business sectors.

Hanjin KAL Corp., the holding company of the Hanjin Group, held a board of directors (BOD) meeting on Feb. 7. In the meeting, they decided to allow the separate election of the chairman of the board and the CEO of Hanjin KAL separately.

They also agreed to comprehensively change the group’s hotel and leisure businesses, which are led by Cho Hyun-ah. Hanjin KAL revised regulations on the BOD to allow the BOD to elect the chairmanship of the BOD, which the CEO was supposed to assume in the past.

“The decision aims to separate the CEO and the BOD chairman and to strengthen the roles of the board of directors overseeing management to enhance management transparency and protect shareholder rights,” a Hanjin Group official explained.

Hanjin KAL also decided to assemble the Outside Director Candidate Recommendation Committee with all outside directors to beef up the independence of outside directors.

Hanjin KAL previously set up a compensation committee in a BOD meeting in November of 2019 to strengthen a system for shareholder rights protection about the company's major management matters.

The Hanjin Group also decided to sell off Jeju Paradise Hotel owned by KAL Hotel Network after deciding to select a lead company for the sell-off of a site owned by Korean Air in Songhyeon-dong, Seoul and a stake in Wangsan Leisure Development.

The top management of the Hanjin Group will decide whether to grow Wilshire Grand Center in Los Angeles and the Grand Hyatt Incheon in Incheon or not after reviewing their business feasibility.

This means that the Hanjin Group virtually made a decision to reorganize its hotel and leisure business.

Referencing the decision, a Hanjin Group official said, “The sweeping reorganization of the hotel and leisure business reflects the Hanjin Group’s will to enhance its financial soundness.”

However, some Korean industry experts concluded that Cho Won-tae is trying to shut down Hanjin Group’s hotel and leisure business to which Cho Hyun-ah showed a deep attachment to.

Cho Hyun-ah worked primarily in the hotel and leisure business from joining Korean Air in 1999 to quitting due to the 2014 nut rage case.

By selling its low-profit assets and non-core businesses, the Hanjin Group will improve its financial structure and concentrate more on core businesses. To this end, the group decided to sell off assets that are not essential or do not generate synergies among the group’s assets.

Sales items include domestic and overseas real estate, such as Hanjin Corp.’s real estate and houses for employees owned by the group, and also equity stakes in Korean companies.

Besides, the Hanjin Group decided to put a halt to its non-core and low-profit businesses and focus on the transportation business which has been the core business of the Hanjin Group.

Therefore, Hanjin Group will elevate the productivity of its air transportation business by introducing new aircraft and increasing aircraft utilization.

In addition, the group plans to expand cooperation with domestic and overseas business partners such as expanding joint ventures with other airlines and forging partnerships with ICT companies. Steady digital innovation will strengthen the group’s business processes and customer services.

Its logistics business will be focused on selection and concentration. Hanjin Transportation plans to foster the courier, international express, logistics center, and container unloading businesses, while raising the profitability of land transportation, forwarding, shipping, and oil sales.

At the same time, the Hanjin Group will increase its competitiveness in specialized business areas, such as the aerospace business, maintenance, repair, and overhaul and in-flight meals, and boost efficiency and generate synergies among Korean Air's IT Department, Hanjin Information Systems and Telecommunication and Topas (travel information provider).