The aerospace division of Korean Air, known as KAL-ASD, has developed into a broadly diversified business with a range of maintenance, repair and overhaul, aerospace and development programmes.
In the second quarter of 2013 KAL-ASD contributed 5.6% of Korean Air’s operating revenues, according to the carrier’s results presentation for the three months ended 30 June. Although the carrier does not break out financial details for the unit, a rough calculation suggests KAL-ASD will generate revenues of around 631 billion South Korean won ($589 million) in 2013.
In the second quarter KAL-ASD was the fourth biggest contributor to Korean Air’s overall revenues, following international passenger traffic with about 56% share, cargo with 25%, and “others” with 7.7%.
A major element of KAL-ASD’s business inevitably involves supporting its parent company. At its main location south of Pusan’s international airport, which it calls Korean Air Tech Center, the company has the capacity to perform heavy maintenance on four large aircraft simultaneously.
The company performs C- and D-checks on over 100 aircraft annually, including Boeing types such as the 737, 747 and 777, and Airbus types like the A330 and A300-600. Key external customers include United Airlines, Southern Air, GE Aviation, and Grandstar Cargo.
KAL-ASD also operates an extensive component support business. It says it performs maintenance work on 25,000 aircraft parts annually on a variety of systems, including avionics, electrics, fuel systems and auxiliary power systems.
One challenge that KAL-ASD – along with other MRO firms in developed nations – has had to face is the rise of low-cost MRO options in countries such as China. While acknowledging the challenge of low-cost competitors, KAL-ASD says it hopes to leverage fast turnaround times and specialised work to remain competitive. It sees passenger to freighter conversions, cabin modifications and IFE system work as areas of particular competence.
NOT YOUR AVERAGE MRO
Here the similarity to airline-run MRO firms ends, however. One of KAL-ASD’s prime areas of business is supporting the South Korean and US military, both with MRO and system upgrades.
Since its founding in 1976, KAL-ASD has provided maintenance and performance improvements for 3,500 military aircraft. The work has mainly been conducted on types such as the Lockheed Martin F-16 and Boeing F-15, which are widely used by the South Korean and US air forces. The company also provides support for Northrop F-5s and McDonnell Douglas F-4 Phantoms.
One area where KAL-ASD sees opportunities is in the modification of specialised military aircraft. It led the systems integration effort involved in the government’s Baekdu signals intelligence aircraft, which saw two Hawker 800XP fitted with equipment to monitor North Korean missile and nuclear tests.
Aside from its MRO work, KAL-ASD produces a range of parts for commercial and military aircraft. It provides wing tip assemblies for the 747, 777 and 787 programmes, as well as a number of other wing components. It also produces the composite rear fuselage of the 787.
The company is also active in developing unmanned air vehicles for South Korean military requirements. The first flight of the company’s KUS-9 UAV – a tactical system optimised for operations in the mountainous terrain found on the Korean peninsula – was in 2009.
“Korean Air has been seeking various ways to contribute to our nation’s military strength, such as tightening its partnership with Boeing,” says a company spokeswoman. “These efforts have to be supported by the Korean government’s policy to enhance its defence industry.
"Therefore, we provide the Korean government with various suggestions for the nation's defence policy, and at the same time pursue the development of quality products to export to overseas market, such as manufacturing UAVs and beyond.”
Whether KAL-ASD intends to expand further into original equipment airframe design and manufacturing remains to be seen. In 2012, Korean Air was a bidder for a major stake in state-controlled Korea Aerospace Industries, whose high-profile projects include the Lockheed Martin F-16-based T-50, and which has been linked to Bombardier as a development partner for a 90-seat turboprop. The government and allied shareholders were offering a 41% stake, with the intention of streamlining decision making under the control of a single major shareholder.
But Korean law demands at least two bidders, and Korean Air’s December 2012 withdrawal left only Hyundai Heavy Industries – hence, no sale. At the time, Korean Air simply sited KAI’s “not proper” share price for its decision, but left no clue as to whether or not it still regarded KAI specifically – and airframe manufacture generally – as an attractive prospect.
Source: Flight International
