Korean Air Says It’s on Safe Path to Recovery
After being buffeted by severe safety lapses, the global economic slump and the Sept. 11 crisis, Korean Air believes it’s finally heading into blue skies again.
South Korea’s flagship carrier is predicting a major rebound this year, aided by a management shake-up, an overhaul of Korean Air’s safety practices and operating structure, a stout rebound in South Korea’s economy, the upcoming World Cup soccer championship in South Korea and Japan, and burgeoning travel by the Chinese.
Unlike many U.S. and foreign airlines, Korean Air also says that its passenger traffic nearly has returned to pre-Sept. 11 levels and that it expects a profit this year. It’s forecasting earnings of about $77 million on revenue of $4.6 billion, compared with a $400-million loss in 2001.
“In less than six months we have fully recovered” from the travel impact of the terrorist attacks, Korean Air Chairman Y.H. Cho said during a visit to Los Angeles.
But Korean Air still faces the challenge of rebuilding its reputation as a safe airline, which has been tarnished in recent years by several fatal crashes and other incidents. The airline’s recovery took a big step forward two months ago, when the Federal Aviation Administration lifted restrictions it had imposed against South Korean airlines overall, thus effectively restoring Korean Air’s status as a safe carrier by U.S. standards.
The FAA placed the restrictions--including a ban on expanding U.S. service--on South Korean airlines because of safety concerns. (The agency doesn’t rate individual foreign carriers.) The curbs sparked diplomatic and economic tension between the United States and South Korea, a major U.S. ally and provider of U.S. imports.
Now, however, Korean Air will be allowed to restore its code-sharing pact with Delta Air Lines this spring in which they book passengers on each other’s flights, exchange frequent-flier miles and thus extend their worldwide reach. Delta had suspended the alliance in 1999 amid the mounting criticism of Korean Air’s safety record. The pact was restored Friday in Seoul, and the code-sharing is expected to start again in the spring.
“We feel very confident with respect to the changes that have been made” at Korean Air, Delta Chairman Leo F. Mullin told analysts recently. “We provided a lot of consulting help to Korean Air on their safety program,” he said, “and we’re very pleased to be resuming our code-share with them.”
The decisions by the FAA and Delta are crucial to Korean Air’s recovery insofar as they help restore confidence in the airline, said Raymond Neidl, an analyst with investment firm ABN Amro in New York. “Delta got firsthand knowledge of the situation, so Delta must certainly be satisfied that they’ve got the job done,” he said.
Southern California also has a lot riding on Korean Air’s progress. Korean Air is one of the biggest foreign carriers, in terms of passengers, serving Los Angeles International Airport. That reflects the sizable Korean population in the region--186,000 in Los Angeles County alone, according to the 2000 census.
Korean Air also is the largest cargo shipper at LAX among foreign carriers. The airline overall has 119 aircraft and 16,000 employees handling nearly 400 flights a day to 82 cities in 30 countries.
The airline’s problems began mounting dramatically Aug. 6, 1997, when a Korean Air 747 crashed on approach in Guam, killing 228 of the 254 people on board. The crash was the latest in a string of incidents involving Korean Air and heightened criticism of the airline’s safety procedures.
Two years later, only days after a Korean Air cargo jet taking off from Shanghai crashed, Korean Air’s president at the time said the accidents were an embarrassment to the nation and demanded changes in management. That led to Cho being named chairman and Yi-Taek Shim becoming the carrier’s president, with them sharing the chief executive’s role.
Cho, a tall, broad-shouldered man who earned a master’s degree in business administration from USC, is the 52-year-old son of Korean Air founder Choong Hoong Cho, who leads the Hanjin chaebol, an ocean-shipping group that owns Korean Air. With Shim, a 30-year veteran of Korean Air, the younger Cho has strived to reform the carrier’s safety.
Vowing to shift Korean Air’s emphasis from financial growth to safety, the pair began a $200-million program that included buying new crash-warning systems and other technology and hiring more foreign pilots and U.S. safety experts. They also tightened restrictions on flying in poor weather.
But Y.H. Cho and Shim also had to clear another big hurdle: a rigid hierarchy among Korean Air’s pilots, rooted in Korean culture, that created friction between the captains, who refused to listen to complaints and concerns, and others in the cockpit. The chairman hopes that hiring foreign pilots will open lines of communication while broadening the pilot base.
The Korean Air crash in Guam was partly due to the failure of the plane’s two other cockpit members to “effectively monitor and cross-check the captain’s” approach to the airport, the National Transportation Safety Board said.
Korean Air’s need to instill more communication among its employees, regardless of rank, unsettled the work force, Y.H. Cho said.
“I received a lot of complaints,” he said. “But I told them, ‘You have to change.’ And we’re changing their mind-sets.”
Then came Sept. 11 and the plunge in airline travel worldwide. In one measure of the falloff, Korean Air’s passenger count at LAX tumbled 14% last year to 710,146, and its freight loads at the airport fell 19% to 103,000 tons, according to the airport.
But Y.H. Cho said that with Korean Air’s traffic returning to normal, its load factors, or percentage of available seats filled with passengers, are running at a typical 70% to 75%. The carrier is planning to add a third daily nonstop flight from LAX to Seoul in May in time for the monthlong World Cup soccer matches that start May 31. Korean Air expects the games to generate nearly $80million in additional revenue for the airline this year. Yet Korean Air’s biggest boost could come from China, where an easing of travel restrictions is helping spark new traffic. With Seoul squarely between Beijing and Tokyo, Korean Air--with 51 flights a week to China--estimates it will carry 1 million Chinese passengers in 2002, double the number it carried three years ago.
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Korean Air Safety Record: A Chronology
South Korea’s flagship carrier is trying to recover from a checkered safety record and the aftermath of Sept. 11. Here are some key events in the airline’s recent history:
Aug. 6, 1997--A Korean Air 747 crashes in Guam, killing 228 of the 254 people on board.
April 15, 1999--Amid growing criticism of South Korea’s aviation safety, a Korean Air cargo jet taking off from Shanghai plunges to the ground, killing nine people.
April 16, 1999--Delta Air Lines suspends its code-sharing pact with Korean Air in which they were booking passengers on each other’s flights.
April 22, 1999--Korean Air shuffles top management, naming Y.H. Cho as chairman and Yi-Taek Shim as president. Both vow reform of the airline’s safety practices and oversight.
Aug. 17, 2001--The Federal Aviation Administration restricts U.S. operations of South Korean airlines due to continued concern about the carriers’ safety records.
Sept. 24, 2001--Korean Air reduces worldwide operations in response to the drop in air travel after the Sept. 11 attacks.
Dec. 6, 2001--The FAA lifts its curbs against South Korean airlines, satisfied that the carrier meets safety criteria.
Dec. 7, 2001--Delta Air Lines, citing “significant improvements” in Korean Air’s safety, says it will resume code-sharing with the carrier in 2002.
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Source: Los Angeles Times
