Jeju Air's tragedy at Muan International Airport has put its parent company, Aekyung Group, in its biggest crisis since its founding. Subsidiaries of Aekyung Group, including Aekyung Chemical and AK Plaza, are facing management difficulties, and Aekyung Industrial has been embroiled in court proceedings related to the humidifier disinfectant incident for over five years. Although the exact cause has not yet been determined, there are signs of an impending boycott against Aekyung Group following this tragedy, raising management uncertainties.
According to industry sources on the 30th, Aekyung Group has five subsidiaries under its holding company, AK Holdings: Jeju Air, Aekyung Chemical, Aekyung Industrial, AK Plaza, and AM Plus Asset Development. The owner's family holds a 46.23% equity stake in AK Holdings, which possesses a 50.86% stake in Jeju Air, 62.85% in Aekyung Chemical, 45.42% in Aekyung Industrial, 57.14% in AM Plus Asset Development, and 76.68% in AK Plaza.
In the context of poor performance across most subsidiaries, Jeju Air is considered the cash cow for Aekyung Group. The establishment of Jeju Air in partnership with Jeju Special Self-Governing Province has been evaluated as 'a masterstroke.' Last year, the consolidated operating profit of subsidiaries was higher for Jeju Air (169.8 billion won) than the combined profits of Aekyung Industrial (61.9 billion won) and Aekyung Chemical (45.1 billion won).
Since its establishment in 2005, Aekyung Group has invested billions of won into Jeju Air, pouring the proceeds from selling AK Duty Free to Lotte Group and participating in paid-in capital increases. Starting in the middle of 2010, Jeju Air surpassed its competitors to establish itself as a leader in the low-cost carrier (LCC) sector. After the COVID-19 pandemic, its performance was also soaring. Jeju Air's revenue last year reached 1.724 trillion won, and its operating profit stood at 169.8 billion won, significantly exceeding the previous record of 101.3 billion won set in 2017. As of the third quarter of this year, cumulative revenue has reached 1.4273 trillion won, with operating profit at 105.1 billion won.
However, forecasts suggest that profitability deterioration following this tragedy appears inevitable. Immediate losses due to ticket cancellations are expected. Jeju Air is waiving cancellation fees for all routes for customers who booked tickets by the day of the incident, which was the 29th. Online communities are filled with posts about canceled Jeju Air tickets, along with queries like, 'I booked through a travel agency; what is the cancellation fee?' and, 'I have to fly Jeju Air as my accommodation cannot be canceled, and I'm anxious.'
◇ Other subsidiaries of Aekyung Group are already facing financial difficulties... Signs of a boycott
Conditions for other subsidiaries of Aekyung Group are already poor. In the case of Aekyung Chemical, last year's revenue was 1.7937 trillion won, down 17.58% from the previous year (2.1764 trillion won). Operating profit plummeted by 52.58% to 45.1 billion won compared to 95.1 billion won in the previous year. Net profit was only 160 million won. Aekyung Chemical was established as an integrated corporation in 2021 from three chemical subsidiaries of Aekyung Group (Aekyung Uihwa, AK Chemtech, and Aekyung Chemical). It has been evaluated as struggling due to poor petrochemical market conditions and a lack of growth drivers.
Jang Hyun-gu from the Research Institute of Heungkuk Securities noted, 'The sales volume of the core plasticizers business division is expected to expand slightly,' but added that 'Due to the delay in the recovery of the PVC product market and rising raw material prices and shipping costs due to oil price increases, profit improvements are likely to be limited.'
AK Plaza has been in the red for the last four years. Until 2019, it maintained stable operations, but has seen profitability decline every year since the COVID-19 outbreak. Last year, revenue reached 247.6 billion won, a 0.1% increase over the previous year, while operating loss widened by 41% to 26.1 billion won during the same period.
Aekyung Industrial recorded revenues of 668.9 billion won and operating profits of 61.9 billion won last year, both up 9.6% and 58.7%, respectively, compared to the previous year. As of the third quarter of this year, cumulative revenue reached 508.0 billion won, with an operating profit of 43.5 billion won; although revenue rose by 3% year-on-year, operating profit decreased by 13.6%. Park Eun-jung, a researcher at Hana Securities, stated, 'Continued sluggish demand from China has led to a decrease in exports and an overall decline in cosmetics sales, resulting in decreased profit stamina.'
The ongoing court proceedings related to the humidifier disinfectant incident also pose a significant risk. On the 27th, the Supreme Court reversed the original ruling that found former Aekyung Industrial CEO Ahn Yong-chan and former SK Chemicals CEO Hong Ji-ho guilty of distributing and selling humidifier disinfectants made of harmful materials, which resulted in human casualties.
Although hearings are expected to continue at the Seoul High Court, consumers are showing signs of a boycott, noting, 'The Jeju Air tragedy reminds me of the humidifier disinfectant incident.' On social media platforms like X, lists of brands owned by Aekyung Group are being shared along with comments such as 'Check once before purchasing and take care,' and 'The company seems to disregard consumer safety.'