Delta Air Lines (DL, Atlanta Hartsfield Jackson) has increased its stake in Hanjin-KAL, parent company of Korean Air (KE, Seoul Incheon), from 5.13% to 9.21%, Reuters has reported. The move follows through on Delta CEO Ed Bastian's pledge in June that his airline plans to raise its stake to 10% over time.
The purchase of 2.4 million shares since August at a cost of KRW69.6 billion won (USD58.3 million), according to a report by Delta to the South Korean securities exchange, helps the flag carrier’s management as it seeks to repel a challenge by a local activist fund.
The Korea Corporate Governance Improvement (KCGI) hedge fund, which owns a 16% stake in Hanjin-KAL, has staged attacks against the airline's management policy in recent months. In August, it revealed that it had asked Hanjin-KAL board members to sue Korean Air Chairman Cho Won-tae because he had allegedly borrowed KRW160 billion (USD134 million) to push the holding company's assets above KRW2 trillion (USD1.68 billion) in an effort to avoid an external audit demanded by the fund, the Korea Times reported.
According to Korean law, a firm with total assets of less than KRW2 trillion may be subject to an external audit by a committee appointed by a board member.
If Delta, which operates a joint venture with its fellow SkyTeam member, ups its stake to 10%, the Korean carrier’s founding family and its allies will have a combined stake of 39%, versus KCGI's 16%.
KCGI is also seeking to buy a 31.05% stake in rival carrier Asiana Airlines (OZ, Seoul Incheon) and has been shortlisted as one of four possible candidates for the purchase.
