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THE INVESTOR
October 18, 2018
Big Reunion

Industrials

Past comes back to haunt Korean Air’s Cho family

  • PUBLISHED :April 20, 2018 - 11:45
  • UPDATED :April 20, 2018 - 18:15
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[THE INVESTOR] As public backlash builds over the misconduct of Korean Air's Cho, some of their past deeds are coming back to haunt them.

News reports are now shedding light on events dating back to 2015 when the Fair Trade Commission zeroed in on Hanjin Group’s affiliate Cyber Sky for being too reliant on inter-subsidiary sales. The government steps in when more than 80 percent of a conglomerate unit’s sales come from other affiliates.

Cyber Sky's shares -- all non-listed -- were consecutively sold off to Korean Air. 


From left, Cho Hyun-ah, Cho Won-tae, Cho Hyun-min.



The problem was what happened before all this. 

Years before Cyber Sky shares were sold, the three Cho family kids -- Hyun-ah, Won-tae and Hyun-min -- had full ownership in the firm. Their shares were divided exactly into three stakes. 

Soon after Cyber Sky took off, revenues began to soar. And why not, industry watchers say, since the company has all of the Hanjin affiliates to depend on for profit. 

In 2008, sales rose to 1.6 billion won (US$1.50 million) from 1.2 billion the previous year. In 2009, it jumped to 3.1 billion won, then to 4.2 billion won in 2010. The following two years sales surpassed 4.9 billion won.

Net profit was also quite high. From 2008 to 2014, accumulated operating profit stood at 7.7 billion won, while net profit reached 4.95 billion won.

When Cyber Sky’s stocks were eventually sold to Korean Air, their value was about five times the acquisition price, handing the three Cho kids a profit of more than 10 billion won.

By Bryan Hong (bhong@heraldcorp.com)

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