Korean Air president Yang Ho Cho explains the airline's success.
Paul Lewis/SEOUL
EACH OF ASIA'S national airlines has a rich and varied past. While some have their roots in post-war independence movements, others were created by the endeavours of individual entrepreneurs. Korean Air (KAL) and its parent, Hanjin, is such an example, tracing its roots back to 1945 and a one-man trucking operation.
Fifty years on, the Hanjin group has grown into a transportation and industrial giant, with operations spanning construction, heavy engineering, finance, shipping and telecommunications. KAL however, without doubt, is the jewel in the conglomerate's crown, pulling in nearly 40% of Hanjin's $9.89 billion revenue in 1994.
When Hanjin inherited state-run Korean Airlines in 1969, the financially troubled carrier possessed just eight aircraft, composed of outdated Douglas DC-3s and DC-4s and a single McDonnell Douglas (MDC) DC-9. KAL is now the third-largest airline in Asia, with 104 aircraft in service and a further 32 on order for delivery through to the year 2000.
KAL's expansion will not stop there, and the fleet is expected to contain more than 150 aircraft by the end of the century. The airline is forecasting a mean 10% per annum growth over the next ten years, but warns that its projections have traditionally been on the conservative side. The rise in passenger and cargo traffic in 1994 alone topped 15% and 17%, respectively.
"Based on our forecasts, we thought we would have enough medium- and high-density aircraft for medium- and long-range routes, but our growth rate is exceeding our expectations," says Yang Ho Cho, KAL president and eldest son of Hanjin founder Choong Hoon Cho.
KAL's order book consists of 12 Boeing 777-200/300s, ten 747-400s, seven Airbus A330s and three MDC MD-82s. A similar number of Boeing 727, 747-200/SPs, Airbus A300B4s and MDC DC-10s is due for retirement.
Past practice suggests that the airline will almost certainly exercise the options which it holds on three 777s, at least five 747s and two A330s. "We've never cancelled options in our history, but rather exceed them," says Cho.
The need for extra capacity has been generated mainly by the boom in tourism, following the South Korean Government's relaxation of travel restrictions in recent years. New types of aircraft, such as the 450-seat 777-300, will be used to open up high-density holiday-maker routes to destinations, such as Hawaii, for example.
In contrast to the strong interest of other Asia-Pacific carriers in smaller capacity ultra-long-haul aircraft, neither the planned A340-8000, nor the 777-100X hold much appeal for KAL. The airline is pressing instead for even higher-capacity aircraft to serve its trunk routes to Europe and the USA.
"The A340 is for immature long-range routes," argues Cho. "We're already flying 23 times a week to New York and ten to Los Angeles, so it doesn't fit. We need to increase the number of seats and reduce the range, as we don't need more than 7,200nm [13,300km] to fly between Seoul and New York."
KAL faces similar under-capacity problems on much of its domestic network, where airport size limits it to operating Fokker 100s. The improvement of some provincial airports, such as the extension of Ulsan Airport's runway from 1,500m (4,900ft) to 2,000m, is allowing the carrier to upgrade services from a 100-seat aircraft to the larger MD-82 or the Airbus A300.
Hanjin, as a major international shipping company, places heavy emphasis on airfreight, which now accounts for some 28% of the carrier's total revenue. KAL's fleet of 11 747-200Fs and two A300B4s is being boosted by the conversion of five MDC MD-11s to freighters and the addition of two 747-400Fs.
The aircraft will be used to develop new routes in Asia and Europe, including Amsterdam, Basle and Brussels.
"We're depending heavily on transpacific operations and we need to balance this out," says KAL cargo sales and marketing vice-president J J Lee.
KAL's rapid expansion has put a strain on personnel and support. The airline traditionally relied on the air force for its source of pilots, but, with rival Asiana Airlines now on the scene, demand has outpaced supply.
At the same time, the recruitment of foreign pilots is being restricted, to US and Canadian nationals, to try to minimise cross-cultural and language barriers, which have caused problems and misunderstandings. Foreigners, however, account for only 77 of KAL's 1,300-plus aircrew.
KAL's long-term solution has been to establish its own flying school on the southern island of Cheju. Over 250 first officers have graduated since 1989, with a further 114 undergoing advanced training on Cheju or ab initio/intermediate schooling at the Sierra Academy of Aeronautics in the USA. The goal is to produce 70-80 pilots a year, says Cho.
To relieve pressure on the airline's three-bay maintenance site at Pusan's Kimhae Airport, a two-and-a-half bay hangar is being built at Kimpo International Airport and is due for completion in 1996. An $80 million engine-component overhaul and manufacturing plant is also nearly finished. This will supplement KAL's engine heavy-maintenance and test-cell centre at Bucheon.
It will not, however, be enough to support the needs of 150 aircraft and, faced with escalating local costs, the airline is warning that it will have start moving some maintenance work offshore.
"Controlling costs is the biggest challenge, but we have to maintain a high quality," says Cho.
Source: Flight International