'Jin Air license cancellation unlikely'
Jin Air CEO Choi Jung-ho, right, who was attending a transport ministry hearing at the Sejong Government Complex, Monday, refuses to answer questions from reporters. / Yonhap
By Kang Seung-woo
Despite a law violation and mounting public anger at the scandal-prone owner family, it would be a tall order for the transport authorities to cancel the business license of Jin Air due to potential massive fallout, market observers said, Tuesday.
“I expect that rather than revoking the license, the (transport) ministry would rather issue Jin Air with a heavy fine or take other actions,” Ellis Taylor, Asia finance editor of aviation and aerospace industry website FlightGlobal, told The Korea Times. He added other actions include banning new route applications.
“From their previous statements, and the protests of the employees, there seems to be a strong case that revoking the license would unfairly impact thousands of employees and have a greater impact on the Korean travel industry, when really only airline management need be punished.”
The Ministry of Land, Infrastructure and Transport held a hearing Monday to review whether to strip the nation's second-largest budget airline of its air operator's certificate after finding Cho Hyun-min, a U.S. citizen and former marketing executive, served on the company's board of directors for six years from 2010 to 2016.
According to the Transport Law, a foreign national cannot hold a post on the board of a domestic or international logistics company and a violation can lead to the cancellation of the firms operating license. Cho is the younger daughter of Korean Air Chairman Cho Yang-ho, whose family members are facing multiple allegations, including embezzlement and tax evasion.
The ministry plans to hold two more hearings, with the second being on Aug. 6. A decision is expected to be made in late September.
An official of the local aviation sector echoed Taylor's view.
“Although the ministry maintains a strong stance on the issue, it would not be easy to revoke Jin Air's license as it would lead to 2,000 employees losing their jobs,” the official said on condition of anonymity.
“Technically speaking, it is the ministry's fault for having failed to detect the violation.”
Many market watchers are concerned about the potentially huge negative impact on the industry.
Amid growing fears of losing their jobs, employees of the low-cost carrier staged a rally, July 25, urging the ministry to stop the hearing. They will hold a second protest at Gwanghwamun, Wednesday.
“A possible disqualification of Jin Air is not an advantage to the local aviation industry as it may degrade the sector's credibility and stability as well as competitiveness,” the official said.
Taylor said, “Obviously the loss of a relatively strong carrier would be a benefit to Jeju Air, Eastar Jet and T'way Air, as well as Air Seoul and Air Busan. However, Jin Air is the first Korean LCC (low-cost carrier) to go long-haul to Hawaii, and so that would be a market that none of those carriers is able to tap yet as they do not operate wide-body jets.”
In the wake of the Jin Air case, there are growing calls for the government to amend the law to global standards to attract more young talented individuals regardless of nationality.
“Budget airlines have had their licenses revoked in other countries, but that is usually due to safety concerns, rather than a regulatory mistake such as this one,” Taylor said.
“Outside of Korea, these types of restrictions are rare, so a case could be made that the law itself should be changed to keep up with the global nature of airlines, and attract more management talent to Korean carriers.”