Shareholders of the carrier voted Cho into the CEO position and also voted to spin off Hanjin Shipping and merge it with its shipping and brand management businesses.
Cho will replace his sister-in-law, Choi Eun-young, in heading Hanjin Shipping. He will be CEO of five companies under the group umbrella, including Korean Air.
The Korean carrier has been trapped in a managerial crisis with former chief executive Kim Young Min resigning late last year after taking responsibility for two successive years of losses.
Cho has vowed to transform the company into a global leader, saying in a statement that the company would be able to overcome its current “difficulties” and “bounce back as a global player”.
However, the road back to profitability will be a bumpy one.
Hanjin Shipping has struggled with its cash flow since the shipping industry was hit hard by the 2008 financial crisis, leaving the company unable to meet its capital requirements for the fleet restructuring. The line recorded a 2013 net loss of $630.2m because of weak freight rates pulled down by the severe oversupply of container vessels. It continued a dismal run for the South Korean carrier, widening its losses from a 2012 deficit of $375 million.
The new shareholding structure voted on by stockholders yesterday is complex, but basically Hanjin Shipping Holdings is allowing Hanjin Shipping to merge with its shipping and brand management businesses. The remaining businesses - a 3PL, Hanjin Ship Management, CyberLogitec and a real estate arm - will stay with the parent firm.
The Seoul-listed carrier told the exchange the move was to enhance shareholder value through greater management efficiency.
A spokesman for Hanjin Shipping said there would be no impact on the line’s operations. “It is part of our structural recovery plan and the aim is to gain more liquidity in the long term,” she told the JOC.
Shareholders of Hanjin Group’s flagship company Korean Air late last year voted to provide $140 million to Hanjin Shipping to stabilize its management. In the first half this year, Korean Air plans to inject $388 million capital into the shipping unit.
Hanjin began closing down unprofitable trade routes this year, withdrawing from the trade between the Far East and the Black Sea. It will end its slot charter agreement with the Asia-Black Sea Express service operated by China Shipping, “K” Line, Yang Ming, PIL and Wan Hai, according to Alphaliner.
It will also drop its trans-Atlantic service because of what it called “dismal market conditions which do not support operational costs,” in the process becoming the first major carrier in years to fully withdraw from a mainstay east-west trade.
Drewry said in a newsletter this week the move “was symptomatic of a carrier that has been forced to curb its ambitions for global port coverage by persistently weak financial performances”.
“Other financially troubled carriers will look to follow the example of Hanjin and pare back their networks, with their peripheral trades the first to go. Maintaining global market coverage is now something only the carriers with the deepest pockets can afford,” Drewry said.
