Unethical Management
The business ethics of Korean Air is again on the chopping block.
Korean Air Flight Crew Union recently expressed their intentions to submit a petition for tax investigation on Korean Air, raising problems such as unfair transactions between affiliated companies, pocketing assets through subsidiary companies, and illegal dispatches of foreign pilots.
According to the union, the “Cyber Sky,” established for sales of duty-free goods and in-flight services, was originally 100% owned by chairman Cho Yang-ho’s three sons and daughters. However, during the process of the investigation conducted by Fair Trade Commission on July 3, the entire share was quickly sold to Korean Air. The union suspects such action as a trick to evade the civil and criminal penalties. Moreover, another subsidiary company “Uniconverse,” which operates a call center and system businesses, has been known to be 100% owned by the chairman Cho’s family, having over 80% of intra-group transactions.
The low fare airline “Jin Air,” another affiliate of Korean Air, reported a 68% growth in the sales and a 113% increase in the operating profit as compared with the same period of last year. However, the company is not owned by Korean Air. Jin Air is 100% financed by “Hanjin Kal,” and the chairman Cho’s family is the largest shareholder of the low cost airline. Subsequently, Jin Air is a meaty subsidiary company which fills only the chairman family’s bellies in its governance structure. Besides, Jin Air, since the launching, has been supported by Korean Air in various ways to maximize its sales, providing aircrafts, sending pilots, and even supporting the flights to Hawaii and Bangkok, which are considered as the cream of the crop. Surely, the profits gained by such efforts do not return to Korean Air, but go to Jin Air and Hanjin Kal, feeding the chairman Cho’s family due to its governance structure.
In addition, since Korean Air pilots are sent to Jin Air as dispatched workers, Jin Air is criticized to use high quality human resources educated and trained in Korean Air without any burden of expenses, while causing the remaining pilots in Korean Air to work overtime and to threaten the flight safety.
The Flight Crew Union also criticized that the preferential treatment and the method of supplying and demanding of foreign captains. The current number of foreign captains is almost reaching 500, yet they are hired by illegal dispatches through an overseas human resource consulting firm (agency) founded by Korean Air. Furthermore, foreign captains are preferred, accounting for one third of the total captains hired in Korean Air and paid 1.5 to 2 times more than Korean captains. Korean Air even has paid taxes on behalf of the foreign captains since the recent amendment of domestic tax laws. The union raised doubts about a possibility of the ever-to-be-unknown amount of money flown into the human resource consulting agency under the name of a commission for headhunting the foreign pilots.
Around 100 pilots from the Korean Air Flight Crew Union gathered in front of the headquarters of Korean Air on June 28 and held a “Gathering to Call for ‘Korean Air Ethical Management,” announcing they will submit a petition for tax investigation to the governmental authority. The labor dispute between the management and the pilot union has been lasting for five months without any compromise since the wage negotiation broke down on February 28.
Korean Air dismissed the claims of the union by calling the allegation of business ethics issue absurd. “(Korean Air) founded and has been operating the overseas headhunting agency to supply pilots,” Lee Jong-wook, the deputy head of public relations department admitted, saying the other allegations raised by the union are groundless.