Korean Air, Vietnam Airlines to join force in cargo business

Prime Minister Kim Min-seok, center, shakes hands with To Lam, general secretary of the Communist Party of Vietnam, during the Korea-Vietnam Business Forum in Seoul, Tuesday. Yonhap

Korean Air and Vietnam Airlines will strengthen their partnership in cargo business, as part of bilateral efforts to meet increasing freight demand in Southeast Asia, the Korean flag carrier said Wednesday.

Under the latest memorandum of understanding, both airlines will utilize Vietnam’s Long Thanh International Airport as a key base for cargo cooperation. The partnership was clinched Tuesday on the sidelines of the Korea-Vietnam Business Forum in Seoul.

The location of the airport, currently under construction near Vietnam’s commercial hub of Ho Chi Minh City, is considered to have strategic benefits. The region has geographical proximity with a number of other major Asian markets, such as Malaysia and Singapore.

The two airlines also agreed to build a facility for maintenance, repair and overhaul (MRO) at the airport. The MRO center will offer services such as aircraft maintenance, component repair and cabin renovation. Both airlines will also join forces to educate tech personnel to handle services at the facility.

Korean Air has a competitive edge with decades-long experience in the defense and aviation MRO industry.

The airline hopes to expand its global MRO presence through the latest partnership with Vietnam Airlines to increase its industry influence, particularly across the Association of Southeast Asian Nations (ASEAN) region.

Korean Air has identified MRO business as a major growth driver, and is building a new aircraft engine maintenence center on Yeongjong Island, where Incheon International Airport is located.

According to a recent estimate by iM Securities, Korean Air will be able to increase its operating profit by up to 150 billion won ($108 million) annually once its new engine maintenance facility here is completed, currently projected for 2027.

Given the tough entry barriers for the market, industry officials expect Korean Air to be able to continue improving its earnings from the business after finishing the new MRO facility in Vietnam.

“Korean Air will elevate its global MRO presence through the latest partnership with Vietnamese Airlines, which will help the former win more orders from major Asian clients from a long-term viewpoint,” an aviation industry official said.

According to market tracker Mordor Intelligence, the Southeast Asian logistics market will be valued at $478 billion by 2030. The market for the region's cargo business is also forecast to rise in line with Asia's overall strong growth potential amid a rapid influx of global tech and manufacturing players.

Incheon International Airport Corp. projects the global MRO market will grow by 19.44 percent between 2024 and 2034, driven by soaring logistics demand both domestically and internationally.