Air Transport World

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KAL Cargo turns its focus on profits to weather the Asian economic storm

SEOUL--Korean Air Cargo has developed a 2-phased 10-year plan aimed at what the airline calls "quality and profit" objectives. The first 5-year phase is aimed at restoring profit through tight cost control and niche marketing, allowing the carrier simply to survive the current economic crisis. The second phase will be aimed at returning to a growth program, including doubling the size of the fleet.

KAL Cargo ranks as the word's third-largest air-cargo operator, having reported 5.7 billion RTKs in 1997. It is the second-largest combination carrier behind Lufthansa Cargo, with the largest Boeing 747F fleet of any combination carrier.

KAL Cargo said that it experienced a negative growth this year, "for the first time since the oil shock in 1979." During the first half of 1998, traffic volume growth decreased by 7%, compared with a 14.6% increase for 1997 over 1996, while revenue fell 12%.

During that 6-month period, KAL Cargo actually increased tonnage flying out of Seoul by 13.2%, from 62,000 tons in the first half of 1997 to 70,000 tons this year. However, cargo into the capital decreased from 66,000 tons to 40,000 tons, or 38.6%.

In 1997, the airline had experienced a 15% growth in both cargo carried and RTK. It carried 1.1 million tons, compared with 954,046 tons in 1996, and flew 5.7 billion RTKs vs. 4.99 billion in 1996.

Cargo sales revenue grew 30% in 1997, primarily because of growth in exports, although the drop in the currency-exchange rate plus an increase in fuel costs negated efforts to cut costs, according to Choong Hoon Cho, Korean Air chairman and CEO.

While the Korean economy still appears to be in a downward spiral, KAL executives indicate that the worst seems to have passed for the airline. They also expect that even when the crisis is over, market growth will be marginal for a period. Predictions on recovery range from three to five years.

Despite the drop in growth, the airline said it has made a profit for the first half of 1998 through its cost-control methods. …

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