ANALYSIS: Korean thinks big on short-haul routes in downturn

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Published: May 25, 2012

Under a revision to its route strategy designed to counter the impact of the economic downturn, Korean Air is to switch long-haul aircraft from destinations in the West to short-haul destinations in Asia.

The SkyTeam carrier says that the change in approach is a temporary measure during the financial crisis to improve cost efficiency and optimise capacity. Earlier this month, KAL reported a first-quarter 2012 net loss of won (W) 67 billion ($ 58.8 million), down from a net profit of W271 billion a year before, which it says resulted from a surge in fuel costs.

“We try to keep a balance between long-haul and short-haul, but with this unstable economic situation we need more short-haul flights,” says the airline’s vice-president of its long-haul network Sang-Beom Lee. He adds that under this strategic change during the downturn, some long-haul destinations have seen or will see reductions in frequency, capacity or both.

Korean has either moved, or will move, large-capacity aircraft such as its Boeing 747-400s from long-haul routes to destinations such as Atlanta, Seattle, Sydney, Toronto, Vancouver and Vienna. On these routes it will either reduce frequencies or use more fuel-efficient, smaller-capacity aircraft such as its Boeing 777 variants, while Korean’s 747-400s will be used to serve short-haul destinations such as Beijing, Osaka, Shanghai and Tokyo. The 777 is also being used on Korean’s new route from Seoul Incheon International airport to London Gatwick, which opened in April.

Explaining the surge in demand which necessitated the changes, Sunghoi Song, vice-president passenger sales, says: “Recently the Japanese are coming a lot to Korea. Before last year’s earthquake they flew long-haul flights to the USA or Sydney, but now they are inclined to travel shorter distances.”

Korea is also a favourite destination for visitors from China, with visitor numbers last year increasing by 18.4% to more than 2.2 million, according to figures from the Korea Tourism Organisation. In addition, Song says: “Koreans have a tendency to travel on shorter flights than on long-haul.”

Korean is also using one of its five Airbus A380s to fly between Seoul and Hong Kong. Lee says that this allows the aircraft to be fully utilised after it returns to Korea from Frankfurt since it began services towards the end of March.

Lee explains that Hong Kong was chosen as a destination for the A380 because high levels of business traffic on the route suit Korean Air’s A380s, which feature an all business-class configuration upper deck. He adds: “We also had to choose a short-haul destination that was A380 ready – and some airports in Japan and China were not.”

Korean will take delivery of the sixth A380 out of the 10 it has on order says it was considering using the aircraft on a route to US SkyTeam partner Delta’s Atlanta hub as well as to Paris for several months in the autumn. Lee says London is being considered as a destination for the A380, including during the Olympics, but says this it is probable that Korean’s sixth delivery of the type will be used to fly to Atlanta, to take advantage of the recently opened $ 1.4 billion Maynard H Jackson Jr International Terminal.

Looking several years into the future, Lee says Korean is likely to use the 20 Boeing 787-9s it has on order to develop new markets in Central and South America, as well as secondary cities in North America and perhaps Kenya, where the market is not big enough for a larger aircraft.

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