After the founder of the tire distribution corporation Tire Bank, Chairman Kim Jeong-kyu, strengthened his management rights at the low-cost carrier (LCC) AeroPremia, he received a heavier sentence in the appeal trial concerning tax evasion charges than the first trial six years ago. Observations suggest that Chairman Kim’s personal judicial risks may disrupt AeroPremia's management and business expansion.
According to legal circles on the 30th, the prosecution sought a 7-year prison term and a fine of 700 billion won for Chairman Kim during the second trial's sentencing hearing held on the 21st at the Daejeon High Court's 1st Criminal Division for violations of the Act on the Aggravated Punishment, etc. of Specific Crimes (taxes) and embezzlement.
Chairman Kim was sentenced to 4 years in prison and a fine of 100 billion won in the first trial in February 2019 for allegedly concealing tire bank employees as agency operators and evading approximately 8 billion won in comprehensive income taxes. He was not immediately taken into custody at that time. After Chairman Kim’s side immediately appealed and even filed an administrative lawsuit to confirm the scope of the tax claims, the appeals process was halted for five years before resuming last August. The appeals court ruling is scheduled for July 23.
In the aviation industry, reactions have emerged that the prosecution's timing of the second trial's sentence came just as Tire Bank secured stronger management rights at AeroPremia. Earlier, on the 2nd, AP Holdings acquired an additional 22% stake in AeroPremia for 119.4 billion won from Daemyung Sonogroup's holding company Sonointernational and JC Partners, thus securing a 68% equity stake. Chairman Kim also holds a 0.61% stake in AeroPremia. As Daemyung Sonogroup decided to focus on managing Eastar Jet and transferred its AeroPremia stake to AP Holdings, Chairman Kim's side eliminated the possibility of a management rights dispute and increased their control.
A day after the sentencing hearing, on the 22nd, AeroPremia unusually distributed materials regarding Chairman Kim's airline management philosophy. Chairman Kim, known for his strong attachment to the airline industry, stated, "I will contribute to enhancing the dignity of South Korea through AeroPremia."
However, forecasts in the aviation industry suggest that Chairman Kim's judicial risks could hinder AeroPremia’s business expansion. Chairman Kim has appointed his closest aide, former Tire Bank Director Kim Jae-hyun, as a representative of AeroPremia to oversee its management since October of last year. He disclosed his corporate mergers and acquisitions (M&A) plans on the 22nd, but uncertainty regarding investments and management could increase depending on the trial outcome.
Some speculate that AeroPremia could be used for succession and gifting to Chairman Kim’s children. AP Holdings, the largest shareholder of AeroPremia, is a personal company entirely owned by Chairman Kim and his three daughters. According to AP Holdings' audit report, as of the end of last year, Chairman Kim held a 20% equity stake, while Kim Seung-yeon and Kim Sung-yeon each held 25%, and Kim Su-yeon held 30%. It is anticipated that when the three daughters receive Chairman Kim's stake in Tire Bank (92.99%), they will utilize personal companies that have Tire Bank as their foundation, such as AeroPremia or Seonggongmaen Co., Ltd.
There is a prevailing outlook that AP Holdings will rely significantly on Tire Bank to cover the remaining payment of 100 billion won owed to Sonointernational and JC Partners by the end of September. This is due to the structure that makes it difficult for AP Holdings to secure funds independently. AP Holdings, which does not engage in separate business activities, recorded an operating loss of 13.1 billion won last year without any revenue. As of last year, the cash and cash-equivalent assets held by AP Holdings were only 1.1 billion won.
Earlier, when AP Holdings acquired shares in AeroPremia in 2023, it funded the purchase through convertible bonds from Tire Bank and Chairman Kim. An industry source noted, "It is an unavoidable situation that Tire Bank's funds will continue to be injected for AeroPremia operations."
In response to inquiries regarding the impact of Chairman Kim's trial on management, AeroPremia stated, "There is nothing to say separately."