Air Transport World

The 'reluctant dragon.' (Korean Air)(Company Profile)

Korean Air views the future with foreboding, although its recent growth has been rapid, even by Asian standards

SEOUL--A certain paradox attends Korean Air: Here is an airline with a remarkable record of expansion over the past decade, sitting on one of the world's busiest markets, a market still enjoying high rates of growth even by Asian standards. And yet, it expresses a cautious, indeed almost pessimistic view of its future.

Asked where Korean is going in the short and medium term future, officials anticipate "unprecedented negative factors," including "severe undercutting of pricing with overcapacity, an uncertain national economy, Western airlines rushing for operations to Asia and rising operating costs."

Elaborated, these factors mean more foreign carriers landing in Korea due to market liberalization, East Asian carriers' business expansion and accelerated price dumping, and "managerial capability coping with the internal and external environment changes due to the increased demands and capacities in the industry."

One would hardly know that the airline in question is one of the world's most profitable on an operating basis, has enjoyed several years of double-digit passenger growth, dominates its domestic markets against a growing but still small competitor and maintains a 45% share of gateway traffic against the onslaught of other Asian and U.S. carriers.

The first point that has to be made and that in many ways acts as-an explanation for KE's growth is recent history. Until 1989, strictures forbade overseas travel for most Korean citizens. Ending that regime, plus a long period of high economic growth created a big demand within South Korea for foreign travel that only now is starting to be tapped. This market is what Korean Air in particular and the Korean aviation sector in general is riding.

"Our sales results show that growth rate for the last three years is over 20% due to the remarkable increase of business and tourist markets out of Korea," says H. …

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