SEOUL (Reuters) – Korean Air patriarch, chairman and CEO Cho Yang-ho died of a chronic illness on Monday, the airline said, raising hopes for leadership renewal just weeks after investors removed him from the board in a victory for shareholder activism.
Shares of the family-controlled airline rose as much as 8 percent and Hanjin Kal, the holding company for parent Hanjin Group, jumped 20 percent on news of the death, reflecting hopes South Korea’s biggest carrier would be run differently under new management or a younger generation of the Cho family, analysts said.
Some investors were also buying on expectations of a potential battle over the 70-year-old patriarch’s stake in the holding firm, said Um Kyung-a, an analyst from Shinyoung Securities.
“Of course, his family will try to inherit his shares, but that can take time and money … So that opens a window for expectations about the takeover battle,” Um said.
Cho holds a 17.8 percent stake in Hanjin Kal that controls the airline conglomerate, and his son and two daughters each owns about 2 percent of the holding firm.
A South Korean activist fund recently boosted its stake in Hanjin Kal to 13.5 percent and vowed to take a role in management, blaming poor governance from Cho and his family.
Korean Air has been plagued by a series of scandals involving founding family members in recent years, culminating in the indictment of Cho in 2018 on charges of embezzlement and breach of trust. Cho denied the charges against him.
The troubles began after Cho’s eldest daughter, Heather Cho, made headlines in 2014 when she lost her temper over the way she was served nuts in first class and ordered the Korean Air plane to return to its gate at a New York airport.
The “nut rage” incident severely tarnished the carrier’s image and generated derisive international headlines for months. Subsequent scandals involving Cho’s daughters only deepened concerns around the family’s leadership.
Shareholders forced Cho off the board in a landmark vote on March 27, making him the first founding family member of any South Korean corporate giant to be ousted in such a manner.
The vote added fresh momentum to growing shareholder activism in Asia’s fourth-biggest economy, long dominated by corporate giants accused of ignoring minority investors.
Cho, whose father acquired and privatized Korean Air 50 years ago and built it to become one of Asia’s top airlines, was named chairman and chief executive in 1999.
He died from a chronic ailment in a Los Angeles hospital early on Monday Korean time, the airline said without providing further details.
A company official said Cho had surgery for lung disease a while ago and his condition had worsened over the past two years.
Even so, his condition was not publicly known and his death came as a surprise to analysts. Only last year he had carried the torch for the Pyeongchang Winter Olympics.
Cho’s only son, board member and Korean Air President Cho Won-tae, is widely seen as his likely successor.