Tuesday, October 15, 2019
Asiana Pays 10 Billion Annually to Kumho Industrial to Use Brand Name
Corporate Self-sacrifice
Asiana Pays 10 Billion Annually to Kumho Industrial to Use Brand Name
  • By Lee Song-hoon
  • April 27, 2015, 07:45
Share articles

 

According to available data, Asiana Airlines pays an annual amount of more than 10 billion won (US$9.27 million) to its largest shareholder, Kumho Industrial, to use the brand name “Kumho Asiana.” Accordingly, there is an argument that Asiana Airlines, which has the highest brand value in the group, is sacrificing too much in order to make up the weak performance of the group holding company Kumho Industrial.

According to Kumho Industrial on April 26, Asiana Airlines decided to pay 11.7 billion won (US$10.84 million) to Kumho Industrial to use the Kumho Asiana brand, which is owned by Kumho Industrial, from May 1 this year to April 30, 2016. Kumho Industrial is the de facto holding company of Kumho Asiana Group and the largest shareholder with a 30.1 percent stake in Asiana Airlines. This contract was privately signed.

Kumho Industrial entered a workout program due to a liquidity crisis in January 2010. The company posted 164.7 billion (US$152.61 million) in operating losses in 2012 and 58.8 billion won (US$54.48 million) in operating profits in 2013. Its operating profits in 2014 reached 39.8 billion won (US$36.88 million).

Asiana Airlines recorded 179.3 billion won (US$166.14 million) in operating profits in 2012. Even though the company posted 11.2 billion won (US$10.38 million) in operating losses in 2013, it returned to a profit with 98 billion won (US$90.81 million) of operating profits last year. The majority consensus is that Asiana Airlines makes relatively good results and has the highest brand value among the subsidiaries of the Kumho Asiana Group. When adding the brand royalties Asiana Airlines has paid to Kumho Industrial from 2012 to the additional royalties of 11.7 billion won (US$10.84 million) to pay over the next year, the amount totals 45.8 billion won (US$42.44 million).

An official from Kumho Industrial said, “We calculated the brand royalty as 2 percent of its annual combined sales.” Kumho Industrial recorded 39.8 billion won (US$36.88 million) in operating profits last year, and more than one fourth of its operating profits worth 10 billion won (US$9.27 million) came from the brand royalties paid by Asiana Airlines.

An official from the industry said, “Considering the actual business results of Kumho Industrial and Asiana Airlines and the effects of each company on the Kumho Asiana brand, it is safe to say that Asiana Airlines is excessively sacrificing for the profits of its largest shareholder.”