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THE INVESTOR
September 27, 2018
Big Reunion

Industrials

What you need to know about Asiana’s no-meal fiasco

  • PUBLISHED :July 03, 2018 - 16:53
  • UPDATED :July 04, 2018 - 14:57
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[THE INVESTOR] Asiana Airlines’ latest no-meal fiasco, which led to the apparent suicide of a catering service firm owner, is garnering heavy criticism from the public.

Since Korea’s second-largest carrier switched its food supplier on July 1, a total of 28 international flights had departed from Seoul’s Incheon Airport without in-flight meals as of 10 a.m. on July 3, in an unprecedented sequence of events since the airport opened in 2001. 




The firm says the situation will stabilize within a couple of days, but even if the food starts coming in, Asiana won’t have an easy time explaining why it had to change suppliers in the first place.


Shady dealings

In 2003, Asiana had to sell off its own catering service business for cash and signed an outsourcing deal with LSG Sky Chefs, owned by German airline Lufthansa. Since then, the two firms had renewed the contract every five years.

Last year, Asiana demanded LSG invest 160 billion won (US$143 million) in bonds with warrants from Kumho Holdings, the group’s holding firm, in exchange for a contract extension. Kumho was hoping to secure enough cash to improve its financial health. At the same time, Chairman Park Sam-koo wanted to regain management rights over cash-strapped Kumho Tire.

But the talks failed and Asiana set up a new joint venture, called Gate Gourmet, with China’s HNA. The new firm was to exclusively supply Asiana’s in-flight meals for the next 30 years.

The problem was that Asiana asked for funding not for itself, but for its holding unit. Kumho Holdings was set up by the chairman in 2016 by merging Kumho Terminal and Kumho & Company with an aim to acquire Kumho Industrial. Currently, the chairman is the largest shareholder, with a 28.1 percent stake. 


Kumho Asiana Group Chairman Park Sam-koo



According to industry sources, this is not the first time Park tried to help out other affiliates using Asiana as a tool.

In a complaint filed with the nation’s antitrust watchdog last year, LSG claimed it had offered to invest in Asiana, not the holding unit, but the offer had been declined. Asiana denied any wrongdoing in the negotiations process, but an investigation is underway. 


Tight deadlines

To be prepared for the June expiration of its partnership with LSG, Asiana had been preparing food supplies with the new joint venture. But the firm suffered a fire at its production plant under construction in March. LSG refused to extend the contract and the airliner sought help from a smaller catering service firm, called Sharp Co & Do.

The firm had produced mostly sandwiches and snacks for about 3,000 people a day. In order to supply meals for 30,000 passengers for Asiana, the firm had to hire five subcontractors.

On July 2, the owner of one of these smaller suppliers was found dead.

“(He) was complaining about (people) saying that he needs to take responsibility,” an acquaintance of the dead 57-year-old businessman was quoted as saying by local daily Hankyoreh on July 3.

A total of 81 out of 82 of Asiana’s international flights were delayed on July 1. More than 30 flights were delayed for more than an hour. Twelve, mostly short-haul flights to Japan and China, departed without meals, and the passengers were given US$30-US$50 vouchers.

According to the contract between Asiana and Sharp Do & Co, Asiana is to receive discounts for 15-minute delays from its food suppliers. If delivery is late by more than half an hour, it gets 50 percent off. This all adds up to more losses for the subcontractors, according to industry watchers.

By Lee Ji-yoon (jylee@heraldcorp.com)

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