Amid prolonged lockdowns and closed borders, the COVID-19 pandemic had been particularly brutal on the aviation sector. But Korean Air, the nation’s flag carrier, was a rare case that turned the crisis into a blessing under the leadership of CEO Walter Cho.
In November 2020 when the coronavirus pandemic was rampant around the world, Korean Air announced a bid of 1.8 trillion won ($1.37 billion) to acquire its crosstown rival Asiana Airlines, paving the way for it to become the largest airline in Northeast Asia. While global rivals were cutting flights on reduced travelers, Korean Air was the first to transform passenger planes for cargo shipping, offsetting pandemic losses.
In Korea’s unique chaebol management system, Cho was the only person who could make these risky but sustainable decisions, and he proved himself right, according to Kim Dae-jong, a business professor at Sejong University.
The eldest son of Hanjin Group Chairman Cho Yang-ho took the helm at the flagship aviation unit in 2019 following his charismatic father’s death.
“Cho, after his ascension to the top seat at Hanjin Kal (Korean Air’s parent company), has put his neck on the line to lead the company, cementing long-term growth, as opposed to other companies that change CEOs who tend to focus more on short-term goals,” Kim said.
Despite pandemic disruptions, the company posted record sales of 13.4 trillion won last year, a 53 percent jump from a year earlier. Operating profits almost doubled to 1.8 trillion won.
Fighting pandemic disruptions
Air cargo is usually transported using the storage compartment in the belly of an airplane. Despite a surge in air shipping during the pandemic years, airline companies struggled to meet demand because of reduced passenger flights.
On March 2020, the Korean Air CEO convened an emergency meeting and said: “If we use empty passenger aircraft, we could expand cargo shipping business while cutting back on airplanes’ stayover costs.”
The company immediately transformed 16 passenger airplanes into cargo transport carriers by detaching all the seats to make room to carry an additional 10 tons of cargo compared to regular cargo planes.
The shipment items ranged from industrial goods such as semiconductors and automotive parts to medicines and fine art.
“Many low-cost carriers also followed our footsteps and launched similar services,” said a Korean Air official on condition of anonymity, touting his company was the first among its rivals to do so. “Despite higher fees, many clients chose our brand which has decades-old know-how in cargo shipping.”
Cho’s “out-of-the-box thinking” gained recognition globally. In February this year, he was named the top aviation leader of the year by global aviation magazine Air Transport World, one of the top honors within the aviation industry.
“Since taking the helm at Korean Air in 2019, Walter Cho has rapidly gained a worldwide reputation for industry vision and dynamic management. His nimble and out-of-the-box thinking, particularly with regard to airline partnerships – especially the transpacific joint venture with Delta Air Lines – and the company’s cargo business, made Korean Air stronger than ever through the worst times of the pandemic,” the magazine said.
“As chair of the SkyTeam global alliance board and a member of the IATA board of governors, Mr. Cho has emerged as an excellent leader at Korean Air and across the industry.”
Another big leap
Korean Air’s bid to acquire Asiana Airlines gained much attention as it was the first major big deal announced at the peak of the COVID-19 pandemic when the entire aviation industry was reeling from business uncertainties.
With the planned merger, Korean Air, currently the 18th-largest airline by fleet, is expected to rise to No. 10 globally, with its business synergy worth an estimated 300 billion to 400 billion won.
“Their merger will offer more diversified and efficient flight schedules for passengers, with overlapping routes getting streamlined for better efficiency,” said Kim.
Having received green lights from 11 countries so far, the deal still awaits approval from the European Union, the US and Japan.
Keen attention is being paid to the EU’s delayed approval. European authorities recently launched an in-depth probe into the deal that could take another few months, citing monopoly concerns on some popular routes to Europe.
Hwang Yong-sik, a professor at Sejong University, offered a positive outlook on the European approval, saying, “There might not be many European air carriers operating direct flights from Korea to Europe due to the higher costs than connecting flights.”
“The EU is expected to give a go-ahead ultimately because mergers and acquisitions among airlines are an irreversible trend amid the industrial restructuring,” he added.
Korean Air and Asiana Airlines have started to prepare for the upcoming merger, with a dedicated task force being set up late last month.
Renewed growth push
Having recovered from pandemic disruptions, Korean Air is ramping up efforts to bolster responsiveness to soaring post-pandemic demand for international travel fueled by the reopening of the all-important Chinese market.
Starting from March 17, Korean Air began restoring flights to China in phases with an aim to expand from 13 flights a week to 99 flights by the May-June period before the summer holiday season begins in earnest here.
The airline also resumed flights to Prague and Zurich in late March after three years of suspension dating to 2020. Routes to Istanbul and Madrid are also expected to resume from April 24.
By the end of April, Korean Air will operate a total of 622 weekly flights on 78 international routes, about 67 percent of the pre-pandemic level in 2019.
A total of 16 new aircrafts -- six of the 787 and 10 of the A321neo -- will be newly launched this year alone. The A321neo is its first small airplane to offer full-flat seats for prestige class passengers.
“By late May, about 20 percent of a total 6,359 flight attendants who are on paid leave will return to work, as demand for international flights is expected to surge,” said the Korean Air official.
In a culinary revamp, the company also plans to add a Korean-style vegan menu, inspired by temple food, to complement its vegetarian options and to extend its wine selection that consists of 52 new wines for passengers traveling to key cities such as Los Angeles, New York and Paris.
When it comes to cargo business, the company will further strengthen ties with global forwarding companies for expansion. It also plans to obtain additional certifications to transport specialized pharmaceutical items such as vaccines, laboratory reagents and serum in blood and other fresh products requiring cold chain storage.
The company is also currently working on producing unmanned aerial vehicles that fly at a medium altitude of 10 kilometers to 13 kilometers as its key growth driver. Set to launch this year, the drones are expected to be used to assist rescue efforts by assessing the scope of natural disaster such as flooding, wildfires and earthquakes.
