With new routes to London and Nairobi, Korean Air is pursuing an ambitious growth strategy this year. The airline’s recent route launch on June 21, 2012 may be to the Kenyan capital Nairobi, but it is Europe that has attracted the legacy carrier’s attention in the first half of the year.
Possibly the most significant of its recent route launches was a decision to give up the chase for more slots at London Heathrow in favour of generous terms from London Gatwick for the launch of three flights a week from Seoul. The airline cheerfully admits it would not have chosen Gatwick had convenient slots been available at Heathrow, but believes that such is London’s pull that inbound travellers will not scoff at the secondary airport as their final destination, while those wanting connecting flights will continue to choose Heathrow.
The Gatwick route’s big selling point will be to travellers from Australia and New Zealand, as flights are timed to provide good connections at Seoul’s Incheon International Airport from both countries, allowing Korean Air to compete more effectively with Middle East carriers on these routes. Gatwick’s launch is accompanied by increases in frequency from Seoul to Auckland, from five to seven a week, and to Sydney, from seven to ten.
Unfortunately for Korean Air, it was also accompanied by British Airways’ announcement of the resumption of services from Heathrow to Seoul from December after a 14-year absence. This was BA’s first route announcement since it gained bmi’s coveted Heathrow slots, underlining the importance of UK-South Korean connections. Korean Air puts a brave face on this, claiming there is room for everyone given the booming trade links and arguing that it has the better product and frequency.
Prague and Amsterdam have also been given Korean Air’s greater attention this year. Korean Air’s Sang-Beom Lee, VP of long-haul network passenger marketing, describes Prague as a new “sub-gateway to Europe”. The airline believes it can tap into the lucrative Eastern Europe market from the Czech capital using its SkyTeam partner Czech Airlines as a feeder. The Amsterdam operation, meanwhile, has been made more attractive. In May the service, which previously went via Madrid on the Seoul-bound leg, became direct and is codeshared with fellow SkyTeam carrier KLM.
Korean Air is now half way through its acquisition of ten Airbus A380s, and in another move that boosts its profile in Europe, it has deployed its latest on the daily Frankfurt route. This was a surprise given constraints at Heathrow, but Sunghoi Song, vice president passenger sales, explains: “London is on the list of future A380 destinations but we chose Frankfurt first. We had to take into account aircraft utilisation. Frankfurt is one hour less than London, which means we can fly the aircraft back to Korea and then on to the US.”
This is an important point, as Los Angeles is the airline’s number one long-haul route and was the first destination for Korean Air’s A380. They are also deployed on New York and Hong Kong and next year appear on the Atlanta route, a prime example of leveraging the benefits of SkyTeam membership. Korean Air, one of the alliance’s founding members, originally flew to Atlanta three times a week, but now has ten weekly flights on its own metal and next year introduces the A380 on some frequencies.
Korean Air is one of the few carriers to order the Boeing 747-8I as well as the A380. The new 747 delivers a 13 per cent fuel saving on the 747-400, an attraction to Korean Air, as it is about to withdraw the older type from Heathrow services in favour of a 777-300 twin jet, admitting it cannot make money with the 747 at current oil prices. It is remaining coy about where it will use its five new 747s, which commence delivery next year.
Outside Europe, Korean Air’s other focus is Africa, where an increasing Asian presence in industry, agriculture and mining, particularly from China and Japan, has prompted a new route to Kenya, making it the only carrier to operate from North East Asia to Nairobi. The three flights a week began on June 21 and is operated as a codeshare with Kenya Airways.
South Korea’s increasingly affluent population will no doubt also find Kenya’s safari destinations an attraction. Closer to home, routes that are predominantly leisure have also been part of this year’s expansion. There is a new service to Da Nang, Vietnam’s beach resort, while Busan, Korea’s second city and an important cruise destination, also sees expansion, with flights from there to Kansai doubling to 14 a week.
There is a new daily evening flight from Incheon to Jeju, the country’s biggest holiday destination. This is significant, as the 737-800 service opens the semi-tropical island to international traffic more easily. Currently, Korean Air’s Jeju services are operated from Seoul’s secondary Gimpo International Airport, while Incheon’s Jeju flights are by its low-cost subsidiary Jin Air.
Jin Air was set up in 2008 as a defensive measure to the country’s burgeoning low-cost market that now includes Asiana’s Air Busan, T’way Airlines and Eastar Jet. Jin Air appears to be standing its ground, as it now flies nine international routes. Although five of these are also routes for the mainline carrier, the point-to-point product, on an all-economy 737-800, is probably sufficiently different for there to be minimal impact on its core business.
However, competition on both the mainline and budget Korean brands increases later this year when Japan ratchets up its low-cost proposition. AirAsia Japan launches daily services from Tokyo to Seoul and to Busan in October, while the first Japanese home grown budget carrier, ANA’s Peach has already begun flights from Kansai to Seoul.
What impact these entrants have on both Korean Air and Jin Air remains to be seen, but the mainline brand is nevertheless bullish about the future. Its fleet of 128 aircraft includes 24 freighters, a reminder that Korean brands like Samsung, the world’s largest mobile phone producer, will always need lift. Korean Air lost its position as the world’s biggest cargo carrier to Cathay Pacific in 2009, but its stated aim is to regain this quickly and to become a top 10 passenger carrier by 2019, its 50th anniversary. It is currently rated 12th.
An advertising campaign is already underway, with household names like Samsung an inspiration for the airline’s hopes of becoming a global brand. Sunghhoi Song believes global recognition and customer loyalty is achievable. “Passengers here are very demanding. If we can meet their needs, I think it can work worldwide,” he says.
Korean Air admits it has a challenge on its hands to make its new London Gatwick-Seoul service profitable in its two-year target timeframe. Korean Air began the thrice-weekly Gatwick flights on Sunday, April 29. The airline’s vice president, long-haul network passenger marketing, Sang-Beom Lee, says the current oil price and start-up costs meant it may have to downgrade its ambitions: “Our original plan was to make it profitable in two years, but it will be very difficult to make that,” he says.
Lee admitted that Gatwick had been chosen only because good slots had not been available at Heathrow. “Unlike other European destinations, London is the final destination for business travellers and tourists. Korean, Japanese and Chinese passengers think London is London,” he says.
Lee says the success of the new service was dependent on attracting higher-yield business travellers who traditionally prefer Heathrow. Korean Air says its Seoul-Gatwick sales have been “better than expected”, but said sales in the other direction have been “quite poor”, particularly as it gives the option to fly the leg from Heathrow to Seoul on a common-rated fare. Gatwick’s flights are on a 261-seat B777-200 twinjet, which includes 28 business Class and eight first class seats.
This story appears in the latest issue of Routes News, which can be read here Routes News. A copy of the world air service development magazine is also in all delegate bags at Routes Africa.
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