Asiana decided to change their in-flight meal caterer in Korea because LSG Sky Chefs was unwilling to acquire bonds issued by Kumho Holdings valued at $142 million.
The airline switched to a new caterer but they are not able to produce the number of meals required. Later, Sharp Do&Co came to the rescue but can only supply one tenth of the meals to the airline. The CEO of the Sharp Do&Co also committed suicide under stress.
Here’s an excerpt from Korea Herald (access their piece here):
A fire had broken out at a plant of its new supplier Gate Gourmet Korea, in March. To fill the gap in supply, Asiana Airlines turned to a smaller company, Sharp Do & Co Korea. But the company, which is capable of manufacturing 3,000 meals a day, was reportedly not able to cover Asiana’s catering service which requires up to 30,000 meals a day during peak season.
In a radical turn of events, the CEO of Sharp Do & Co Korea was found dead in an apparent suicide Monday.
Industry insiders said that the fiasco started after Asiana terminated a 15-year-old deal with LSG Sky Chefs, a subsidiary of German airline Lufthansa, and inked a contract with GGK instead. GGK is an in-flight catering service firm Asiana jointly set up with China’s HNA Group. Starting from July, Asiana was to receive GGK in-flight meals for the next 30 years.
Some insiders have claimed that the 15-year-old partnership with LSG ended after Asiana reportedly demanded the German company acquire 160 billion won ($142 million) worth of bonds issued by Kumho Holdings at a time when Asiana was seeking to secure capital to buy back Kumho Tire.
Why would LSG Sky Chefs buy bonds of Kumho Holdins to secure Asiana’s business? They are in catering business and not financing Korean tire company.
The Korean way of number of families controlling pretty much all the important companies through web of minority ownerships is not the most effective way of allocating capital or corporate governance as this LSG Sky Chefs/Asiana/Kumho Holdings/Kumho Tire-case illustrates.