Chairman Kim Jeong-kyu of Tire Bank is seeking to acquire control of the low-cost carrier (LCC) Air Premia through a personal company, while instructing Air Premia to reduce expenses despite the equity acquisition not being finalized, leading to backlash from the members. It is reported that Chairman Kim has proposed to eliminate various benefits and reduce hiring personnel for the sake of financial structure improvement.
According to the airline industry on the 20th, AP Holdings, in which Chairman Kim Jeong-kyu and his three daughters hold equity, is set to make the final payment for a 22% stake in Air Premia at the end of September. In May, a contract was signed to acquire the 22% equity owned by Daemyung Sono and JC Partners, the second-largest shareholders of Air Premia, and a contract deposit of 20 billion won has been paid.
If the remaining payment of 99.4 billion won is completed, the equity held by Chairman Kim will exceed 70%, making him the single largest shareholder and allowing him to exercise management rights alone. Currently, AP Holdings holds 48% equity but is operating the company jointly with the second-largest shareholder. After the payment of the deposit, Chairman Kim sent a letter to employees stating, "If Air Premia fails, the lives of all employees will also fail," which caused controversy.
Although he has not yet secured complete control, Chairman Kim has proposed cost-cutting measures. The gist is to reduce benefits for flight and cabin crew working on international flights and to change working conditions. There is also a plan to reward employees who reduce expenses.
According to the Air Premia labor union, the company is reviewing cuts to lodging and shuttle services provided to crew during international flights. It includes lowering the standard of accommodations and canceling the operation of crew-exclusive shuttle buses previously supported by the company for transportation from the airport to lodging.
They decided to reduce crew rest time and increase quick turnarounds (flights that return without local stay after same-day flights). Starting this month, the Incheon-Da Nang route was changed from "local stay" to quick turn work. Other airlines guarantee at least one night's rest for flight and cabin crew considering the fatigue of those flying medium-haul routes.
Chairman Kim also instructed that the company personnel should not increase to reduce labor costs. Currently, about 1,000 employees work at Air Premia. Air Premia is aligning its workforce, including flight and cabin crew and maintenance staff, according to the Ministry of Land, Infrastructure and Transport's recommendations on the necessary personnel per aircraft, but more staff may be needed with additional aircraft.
Focusing on cost reduction in the airline industry can compromise safety management. A source in the airline industry said, "Air Premia's workforce is relatively small compared to other companies. The work environment is poor, leading to frequent turnover and a high resignation rate."
Air Premia stated, "Chairman Kim Jeong-kyu instructed to review expenses as part of the corporate due diligence process after signing the contract in May as the majority shareholder, but he is not involved in management," adding, "We are maintaining an appropriate workforce as advised by the Ministry of Land, Infrastructure and Transport, and the union's opinions are somewhat excessive."
In July, Chairman Kim Jeong-kyu was sentenced to three years in prison in an appeal trial for alleged tax evasion totaling 8 billion won. Chairman Kim is accused of concealing his identity to operate a Tire Bank sales agency, making it appear as if an independent manager was running it, thus evading tens of billions in comprehensive income tax.