Korean Air flying high

Chi Chang-hoon, Korean Air president and COO / Korea Times photo by Shim Hyun-chul

By Lee Hyo-sik

• Published Mar 3, 2013 10:30 AM KST
• Updated Mar 3, 2013 10:30 AM KST

Flagship carrier leads in innovation to serve new markets

By Lee Hyo-sik

Korean Air, the nation’s largest flagship carrier, has changed the airline industry paradigm over the years by introducing a wide range of innovative products and services. The carrier, founded in 1969, has been the first to operate next-generation aircraft, such as the Airbus A380. It consistently shifts to meet constantly changing customer needs.

Korean Air has made inroads into the hotel sector to create synergy with its aviation business, and has launched flights into Africa and other largely untapped markets to secure new growth engines.

The firm has also been conducting an array of employee-initiated community service programs both at home and abroad, setting an example of how corporate social responsibility (CSR) should be put into practice.

Using its success as a springboard, Korean Air now seeks to become one of the world’s top 10 passenger carriers and the No. 1 cargo carrier by 2019, with annual revenue of 25 trillion won ($23 billion).

In an interview with The Korea Times, Chi Chang-hoon, Korean Air president and chief operating officer (COO), said the carrier has emerged as a premium air transport service provider.

“We have always been a pioneer in bringing change and innovation to the airline industry. We will continue to do so in the future providing a top-notch flight experience and superb customer service,” Chi said.

The company currently ranks 14th in passenger transport and second in cargo transport, employing 20,777 across the globe, including 436 non-Korean pilots. It operates a number of international routes connecting 124 cities in 43 countries, with 148 aircrafts.

Overseas expansion

The president said the airline will continue expanding its reach overseas, focusing primarily on Africa, the Middle East and other regions traditionally unfamiliar to Korean travelers.

“In 2012, we launched seven new international routes,” he said. “In June, we began flying to Nairobi, Kenya, from Incheon three times a week. We became the first airline in Northeast Asia to open a direct flight to an African nation.”

Africa has huge potential for growth, Chi said, adding that the continent is an emerging market for the global air travel industry.

“We are optimistic about the Incheon-Nairobi route, despite the current low occupancy rates. In the future, more Koreans will travel to Nairobi for leisure and business purposes in Kenya and other African countries. Additionally, a growing number of Japanese and Chinese travelers are boarding our flight to Kenya at Incheon Airport,” the COO said.

Korean Air also resumed a direct flight to Riyadh, Saudi Arabia, last year, helping Korea expand bilateral economic and cultural exchanges with the oil-rich Middle East.

The carrier plans to open a regular flight to Colombo, Sri Lanka and the Maldives in March to meet growing travel demand to southern Indian regions. In July, it will open the Busan-Nanjing route to make it easier for people residing in Korea’s second-largest city to visit the historic Chinese city and its adjacent areas.

“When we decide on new routes, we consider not only current travel demand, but also the long-term growth potential. Even if we do not make money immediately, we develop and operate the route for the travel market in three to four years,” Chi said.

When asked about the company’s plan to take a 44-percent stake in Czech Airlines, the president said the move was intended to strengthen cooperation with one of its Sky Team members.

“The Eastern European market is growing rapidly,” he said. “We would like to establish a stronger presence in the region. As part of this effort, we will spend several million dollars to become the second-largest stakeholder in Czech Airlines. However, we will not be involved in the management.”

Czech Airlines is a major carrier in Eastern Europe. Its 26 aircrafts fly to 62 cities in 41 countries.

Chi said Korean Air has been asked by many airlines in Asia, Africa and South America to acquire stakes and share management knowhow. “But given the increasingly competitive global marketplace, we are not in a position to make any further investments.”

Moving into hotel business

In a bid to boost its passenger transport business, Korean Air has announced a plan to redevelop the historic Wilshire Grand Hotel in Los Angeles into a 73-story structure that will offer 900 rooms. The company is expected to spend nearly $1 billion on the project.

“The redevelopment scheme does not mean that we made a full-fledged entry into the hotel industry,” Chi said. “It is primarily designed to create synergy with our aviation business. When the airline industry grows, hotels and other hospitality-related sectors benefit from it.”

He went on to say that a global hotel brand will manage and operate the Wilshire Hotel. The carrier currently operates several hotels near Incheon Airport and on Jeju Island.

The president said the firm will actively develop a wide range of leisure products with travel agencies to generate new travel demand. “We would like to create new demand so that more people will fly with us and stay at our hotels.”

When asked about Korean Air’s attempt to build a luxury seven-star hotel in downtown Seoul near Gyeongbok Palace, he said the government should make it possible for the company to construct what he described as a “multi-cultural complex.”

In 2008, Korean Air bought a 36,642 square-meter plot in Songhyeon-dong, Jongno, for 290 billion won. However, it has not been able to develop the plot because Seoul City opposed the proposal, citing a law banning the construction of a hotel and other entertainment establishments within 200 meters of schools.

“It is unfortunate that we have not been able to build the comprehensive cultural complex, which will offer 156 luxury rooms for foreign heads of states and other VIPs. There is currently no such lodging facility that can appropriately accommodate high-profile figures in Seoul,” Chi said. “We really hope that the new government will overhaul the outdated laws and make it possible for us to proceed with the project.”

Nurturing Jin Air

Korean Air will turn Jin Air, its low-cost unit, into one of Asia’s leading budget carriers, the president said.

“A number of low-cost carriers based in Southeast Asia and Japan have entered the domestic market,” he said. “But Jin Air has been faring well thanks to its price competitiveness, operational efficiency and superior safety records.” “It clearly benefits from parent Korean Air’s state-of-the-art maintenance and operational know-how. This has made it possible for Jin Air to provide flight services at lower prices.”

Jin Air currently operates nine Boeing 737-800 aircrafts, serving the Gimpo-Jeju route and 11 international routes. It plans to add two new planes to its fleet this year, and fly to more foreign cities.

Being a model corporate citizen

Korean Air has been conducting a wide array of CSR activities at home and abroad, Chi said.

The carrier has been widely known for its tree planting project in Mongolia and China. Every year, hundreds of Korean Air employees go to Mongolia and plant tens of thousands of trees to counter desertification and yellow sand storms. Additionally, the airline has been conducting a reforestation program in China’s Neimenggu desert since 2007.

“The company has been introducing community service schemes here and overseas to improve the learning environment for students, assist those in need after natural disasters and conserve nature. This year, we plan to build dozens of schools in Kenya and other African nations” said Chi, adding Korean Air intends to do more to make the world a better place to live.