Walter Cho, Chairman and CEO of Korean Air, tells Graham Newton that airline partnerships provide value for all aviation stakeholders, including the end customer
The history of Korean aviation is inextricably linked with Korean Air. For 50 years, the carrier has been an essential component in the country’s growth. The challenge now is to continue fulfilling its vision to support the national interest while thriving in a dynamic, competitive market.
Are you happy with the airline’s performance, financially and operationally?
In 2018, we achieved record annual passenger and revenue numbers, close to 27 million and KRW12.65 trillion respectively. Operations were very smooth, and we handled the Winter Olympic and Paralympic Games in PyeongChang very well.
Everything was made possible by the Korean Air team and I am very grateful for their efforts.But we must always challenge ourselves to do better. I think operations can be even more efficient, for example. There is no fundamental change that needs to be made, but there are always many small improvements that can add up. The sales performance outside of Korea, for example, is also something that we can improve.
How will the airline work to develop cargo and what improvements can be made to current cargo processes?
The cargo market changes every year and it’s very hard to predict the future. There is no doubt that we are in a downturn and that will affect results.
The airline is doing what it can to mitigate the challenges. We have new, fuel-efficient aircraft and there is also a new cargo system to make reservations and operations more efficient.
But though we have been very active with IATA’s e-freight initiatives, we are not seeing many positive results yet because there is still much to be done at the industry level.
We will continue working hard with IATA to get the technology standards we need implemented more widely. Paperless cargo is an essential one, because the sector must be more efficient.
One of the most important benefits we offer is child care. It allows us to ensure diversity within the company because we are very supportive of mothers working for Korean Air
How important is the joint venture with Delta?
Delta Air Lines has been a very important partner for Korean Air since the 1990s. The joint venture (JV) has been approved by both governments and it is already proving to be crucial in the transpacific market.
Traffic and revenue in this important market segment have increased and both partners are continuing to add routes between the two countries.
It is not surprising that the JV is working well because Delta has plenty of experience in this regard. For Korean Air, we are learning as we go along but we are learning fast. Delta is a very easy airline to work with and the relationship we have with them means that both carriers are aligned on our goals and what we need to do to achieve them.
Is consolidation the only way forward for airlines in an increasingly competitive market?
I believe consolidation is essential for airlines. If we go back 20 years, Korean Air basically flew anywhere in the world where it perceived there to be sufficient demand for its services. That is no longer the case. Now, when we see there might be demand for connectivity to Korea in a particular country or region, we look first to partners.
It is highly likely that a partner will be the most cost-effective way of serving a destination and that partner, in turn, benefits from connecting to our network. So, though merging as other industries do is prevented for international aviation, such partnerships as alliances, codeshares, and joint ventures are providing the same benefits when developing networks. It is something that I strongly believe in. It is better for the airlines, better for the passenger because of the extra connectivity, and better for the environment because of the optimized network.
Creating and maintaining partnerships with other airlines is not about limiting connectivity, it is about improving it.
How do you combine the airline’s public and private faces? The airline is the flag carrier and important to the country’s economy, but it is also a private concern aimed at profits.
It is very important that we help the national economy to grow but we can do that best by being an efficient, privatized company.
Korean Air is one of the main companies in the country. Korea’s geographical location means that air travel is essential for people and goods and, in turn, that has made aerospace a very big sector.
KRW 12.65tr - 2018 saw Korean Air achieve record revenues of KRW12.65 trillion
715m - In the past 50 years, Korean Air has transported 715 million passengers, carried 40.54 million tonnes of cargo and flown over 10.187 billion kilometers, equating to over 250,000 laps around the Earth.
Of course, we will always put the national interest first but obviously it cannot interfere too much with the needs of the company. That has never been the case anyway. The needs of Korean Air are naturally associated with the country it serves.
Is diversity a key topic for the airline and how will you attract more female employees in technical and management roles?
Korean Air is one of the biggest companies in the country. We’re also one of the most popular to work for. We always have a great selection of applicants for all positions.
Even so, one of the most important benefits we offer is child care. We have a lot of initiatives in this area, especially in the area of education. It allows us to ensure diversity within the company because we are very supportive of mothers working for Korean Air.
What will migrating your information technology services to the Cloud achieve?
Personally, I have a lot of interest in information technology (IT) and the Cloud.
The airline has been working very hard in recent years to implement new technology throughout the company and its operations. And the easiest way of doing that is to migrate everything to the Cloud.
It allows us to not only use new technologies, especially passenger-facing technologies, but also to analyze the data we get, which means we can make more accurate forecasts and understand our customers’ needs.
There is so much opportunity in having an up-to-date IT platform.
Korea in general has been slow to adopt the advantages of using the Cloud so the airline has had to be a leader in this field. But we’re happy to be a pioneer in this instance.
We will always put the national interest first but it cannot interfere too much with the company needs
What was the situation with “no-show” passengers and why have you taken such a strong stance against them?
Simply, the airline used to be very generous in its attitude to no-show passengers and it was very easy for passengers to deliberately miss a flight without penalty.
The situation couldn’t continue so we have introduced penalty fees, or a mileage deduction if flights were booked using frequent flyer miles. There is, of course, an element of operational disturbance but really, it is not about the airline. We have taken this stance because it is rude to all the other passengers who made the effort to be on time. It is not fair to disrupt everybody. It had happened too often and had become unacceptable. We decided therefore to send a clear message in the hope that this will stop the majority of no-show passengers.
What do you see as the main challenges and opportunities on the regional level?
The main challenge is definitely the airspace. For flights heading westbound to Europe,
it can be very difficult to get clearance for take-off. At Korean Air, we are working with the authorities to see where we can make improvements. Airspace in general has to be made more efficient.
The US-China trade conflict has also become a challenge. We all hope the situation can be resolved amicably because there is no doubt that it has begun to affect the movement of trade and people in the region. We can certainly see some reduction in traffic on some Chinese routes.
The big plus, though, is the significant growth in demand for air travel in general. And we are also seeing some very positive GDP numbers across the region. They both look set to continue.
But, of course, it follows that we will therefore need the infrastructure to handle the increase in traffic. We have an excellent airport that is often voted as the best in the world but that doesn’t mean too much if you can’t take-off. So, it comes back to the airspace challenge. That is what we have to solve to take advantage of the opportunities on offer.
Passenger business by route
- 27% Americas
- 21% South East Asia
- 19% Europe
- 12% China
- 11% Japan
- 6% Domestic
- 4% Oceania
Many new airline CEOs are coming from outside the industry. Does a modern airline CEO need aviation experience?
I think that CEOs coming from outside the industry is a positive development for air transport. It will be good for the industry to get different views on business models and strategies.
However, the core of aviation is safety. That is the biggest service we provide for the passenger and a lot of specialist work goes
into that. The CEO needs to know about that.
Having said that, no CEO runs the airline alone. There is usually a team of excellent, experienced people working with him or her, who can help with the technical and operational side of the business. So, overall, I welcome new perspectives. It will help the industry to innovate.