Korean Air will have to pay a much higher price than expected for the misconduct of its executive Heather Cho that set off an intense public backlash, industry sources said Thursday.
They noted that Korean Air and its holding company Hanjin-Kal lost almost 240 billion won ($217 million) in terms of market value since the prosecution’s investigation started on Dec.12.
Despite the favorable business environment that includes low fuel prices, Korean Air’s shares declined 5 percent over the week, while its local rival Asiana Airlines enjoyed a 5 percent increase.
“Given that this is a very sensitive issue, it is difficult to gauge the exact business impact right now,” said an analyst on condition of anonymity. “Depending on the government sanctions, damages ― both tangible and intangible ― could reach hundreds of millions of won.”
Public anger has been escalating since Cho, eldest daughter of Korean Air chairman Cho Yang-ho, forced a Korean Air flight to return to the gate on Dec. 5 at New York’s JFK airport over the way she had been served some nuts in the first-class cabin.
She is also suspected of using abusive language and violence when she forced the cabin manager Park Chang-jin to get off the plane.
On Tuesday, the Transport Ministry said Korean Air could face 31 days of flight suspension on the Incheon-New York route or a 2.16 billion won fine for violating aviation law.
Currently, the flag carrier earns some 1.2 billion won per day on the lucrative route. The possible business suspension could cost the company a combined 37 billion won.
Its executives, including Cho, are also expected to face additional charges as they were found to have attempted to cover up the incident by pressuring employees to lie during the government probe.
After suffering a sales loss of 19.6 billion won last year, Korean Air has made all-out efforts to restore profits this year.
But with its corporate brand now severely tarnished, the company’s key projects, including the construction of a new luxury hotel in central Seoul, have been stalled as they may fail to get government approval amid public anger.
By Lee Ji-yoon (jylee@heraldcorp.com)
