Asiana Airlines could have to pay $6.13 million after losing a battle against Gate Gourmet Korea (GGK), an aviation catering company. The ruling comes following the contract signed in 2016, giving GGK exclusive catering rights on the Korea-based airline.
A judge determined the contract, which ultimately pushed out Asiana’s previous long-time caterer, gave the carrier significant financial profit and reduced competition. The airline’s former Chairman, now disgraced and facing imprisonment, was reportedly behind the deal.
What led as much as the ruling
Asiana had previously partnered with LSG Sky Chefs Korea (LSGK) to supply inflight meals. The corporate, a three way partnership between Asiana and Germany-based LSG Group, was formed in April 2003 and had a 15-year agreement with Asiana, set to run out in the summertime of 2018, in accordance with Jus Mundi. Nonetheless, Asiana was reportedly not pleased with LSGK’s pricing structure, which made the airline seek a substitute caterer.
Photo: Tom Boon/Easy Flying
In response to ch-aviation, Asiana’s parent company, Kumho Asiana Group, put a long-term inflight catering contract up for bid in 2015 after an acquisition vehicle required capital to fund planned acquisitions. In exchange, the successful bidder would then comply with put equity into the corporate by buying warrants.
Forming a brand new catering company
GGK was then formed through a three way partnership between Asiana and Gate Gourmet Switzerland (GGS), a subsidiary of Gategroup, the operator of the Gate Gourmet brand. Becoming the successful bidder in 2016, GGK agreed to the contract to supply catering services to Asiana for 30 years. The agreement was confirmed and governed by Korean law on December 30, 2016, in accordance with Jus Mundi. GGK then proceeded to purchase warrants at a 0% rate of interest.
Photo: Gate Gourmet
LSGK, which provided as much as 30,000 meals each day on Asiana flights, generated most of its revenue from its partnership with the airline. The corporate was aware of Kumho Asiana Group’s latest contract but didn’t decide to take part in the warrants deal, in accordance with ch-aviation. Because of this, LSGK lost its existing contract, which prompted the corporate to file a criticism with the South Korea Fair Trade Commission (FTC).
Investigation and the judge’s order
The FTC then investigated the situation and reportedly found that Kumho’s acquisition organization was granted a financial advantage of $12.3 million from its take care of GGK. Asiana claimed the brand new contract was “more favorable,” whatever the 0% rates of interest attached to the warrants.
The contract details were then picked up by the media when a hearth occurred at GGK’s facility in Seoul Incheon, which caused a considerable disturbance in the availability of inflight meals, in accordance with ch-aviation. In a serious twist, Asiana then sued the previous management of Gate Group for reportedly conspiring with Kumho and its former Chairman Sam-Koo Park.
The FTC determined that Asiana’s take care of GGK breached the regulatory tendering process to advertise competition within the industry. The commission fined the airline half of the $12 million it received, but Asiana appealed the order.
Nonetheless, a judge reportedly upheld the tremendous on June 1st and blamed Park for his involvement. The disgraced former Chairman was sentenced to a decade in prison last yr on unrelated corruption charges, in accordance with ch-aviation.
Sources: Jus Mundi, ch-aviation
