The enormity of crisis last year is by now well-known to industry players. International Air Transport Association (IATA) figures show the industry ending 2009 with cargo in a fullyear decline of 10.1 per cent – the largest ever post-war decline – with an average load factor of just 49.1 per cent.

“We are ending an Annus Horribilis that brings to a close the 10 challenging years of an aviation Decennis Horribilis. Between 2000 and 2009, airlines lost US$49.1 billion, which is an average of US$5 billion per year,” Giovanni Bisignani, IATA’s director general and CEO, says.

“The worst is likely behind us. For 2010, some key statistics are moving in the right direction. Demand will likely continue to improve and airlines are expected to drive down non-fuel unit costs by 1.3 per cent. But fuel costs are rising and yields are a continuing disaster. Airlines will remain firmly in the red in 2010 with US$5.6 billion in losses,” he says.

But with economists in disagreement as to predictions of when exactly the world economy will fully recover from the recession, many have stuck withforecasts of a slow, gradual recovery for the air cargo industry. Some warn thatair cargo may not ever reach the previoushigh levels of growth witnessed prior tothe global financial crisis in mid-2008.

And as the recovery creeps along, many carriers are still languishing from the impact of the global recession. But Korean Air, the world’s number one commercial cargo carrier, is most definitely not. The airline has, since September 2009, been experiencing a huge increase in exports of electronic products.

Fortune change
Unlike the sluggish business faced by its counterparts in relatively shrunken markets, Korean Air’s fortune changed in the fourth quarter as South Korean IT exports increased with improved demand from the US and Europe. Between October-December, the airline posted a profit rebounding from a loss the year before.

In a regulatory filing, the airline says it earned 122.29 billion won (US$107.2 million) in the three months ended 31 December, compared with a net loss of 644 billion won a year earlier.

Despite a 4.9 per cent fall in revenue to 2.58 trillion won from 2.71 trillion won a year earlier, Korean Air recorded a third straight quarterly net profit after six consecutive losses. “Earnings were boosted by ‘surging growth’ in the cargo business,” said Korean Air Lines, the world’s biggest carrier of international commercial cargo among passenger airlines.

Cargo sales rose 22 per cent to 942 billion won from the same period the year before, Korean Air said, calling the sector the “major growth driver” for revenue during the quarter amid “a recovery in consumer spending worldwide.”

Thanks to a steep increase in export volume by Korean companies, Korean Air was able to handle record outbound cargo traffic. As the increased traffic coincided with the usual peak season of the cargo business ahead of festivities such as the Thanksgiving and Christmas holidays in the US and Europe, a recovery in consumer spending in those markets also fuelled the growth in recent months. Popular export items included mainly LCD panels, cellular phones, laptop computers and car parts for the US and European markets.

In 2009, Korean Air added a new freighter service to Hanoi, but cancelled another service to Lulea in Sweden and Munich in Germany.

2010 strategy
Asked about Korean Air’s 2010 strategy, Jung Yoon Dong, vice president of Korean Air cargo strategy & development department, says: “Korean Air will strive to the next step continuously changing to survive a fierce struggle in air cargo market. To survive, we’re going to maintain optimised supply strategy, as well as develop new markets such as Central Asia, Africa, and Central & South America.”

This includes new markets like Navoi in Uzbekistan. When Korean Air launched its B747F three times a week service to Navoi International airport (NVI) in 2008, it was only a small passenger terminal with seven domesticand one international flight.

The Uzbekistan government has asked Korean Air to help turn NVI into a Central Asia hub by moving larger volumes through it and Korean has been in talks with NVI.

“We have first recommended that they should establish advanced facilities for the air cargo terminal to handle a target cargo volume of about 110,000 tonnes annually. And for handling such a volume, NVI needs to have an 11,000 square metre cargo terminal under the first phase of NVI’s development project,” a Korean Air spokesman said. This will include the ability to simultaneously park five aircraft in front of the terminal.

In terms of its overall network, Korean Air is aiming to optimize its capacity and routes with pricing systematically controlled by headquarters in Korea with a sharp eye on increasing yield. “Also, we will emphasise the supporting system for sales activity based on analysing various demand data. More importantly, to meet air cargo customers’ needs, Korean Air’s service can guarantee the definite service quality including timely, safe, and customised service for special cargo such as live animals, pharmaceuticals, IT products, etc,” said Jung.

“As one of the leading cargo carriers in terms of global leading service. Korean Air is going to upgrade its service by broadening our investment in the information technology department. Korean Air is already leading e-freight service on the volumes of paperless service that is a key initiative of IATA’s ‘simplifying the business’ campaign,” headded.

Fleet renewal
Regarding its fleet renewal programme, the airline said its current fleet comprises 25 B747-400 freighters, including eight Extended Range Freighters (ERFs). As part of its new fleet management plans between 2010 and 2015, Korean Cargo plans to add three B747-400Fs, seven B747-8Fs and five B777Fs.

Between now and 2019, the 50th anniversary of its establishment, Korean Air will continuously increase its passenger and cargo fleet by launching cutting edge aircraft such as B747-8F, B777F, A380, and B787, the airline said.

In addition to its freighters, Korean Air also utilised the 163,760 tonne belly hold capacity of its passenger aircraft to carry 103,958 tonnes, representing a 64 per cent load factor in the fourth quarter of 2009.

As a hub of the Northeast Asian region, Korean Air has managed to meet the region’s rapidly increasing demands by adding sufficient freighter flights.

In order to maintain Korean Air’s world number one position in the immediate term and in a bid to be a more eco-friendly air cargo carrier, the airline is scheduled to take delivery of four new freighters – three B747-400Fs and one B747-8F – which will be delivered this year.

The new redesigned B747-8 Freighter will be launched on one of Korean Air’s main routes such as the transpacific or Asia-Europe routes.

SkyTeam Cargo Alliance
Korean Air is part of the SkyTeam Cargo Alliance (SKTC) with key partners, Air France-KLM, Alitalia and Czech Airlines located in Europe and Delta and Aero Mexico in the Americas. The alliance partnership allows the members to provide their customers with seamless air cargo service at any airport.

The SKTC has an Operation and Purchasing Working Group (OPWG) which brings together and actively shares the expertise with all the group’s partners. OPWG is in pursuit of a “one roof project”, which will allow all SKTC partners to share warehouses at destination airports thereby cutting costs and securing more traffic with guaranteed customers.

Presently, SKTC partners which operate to and from Incheon International Airport include Air France-KLM, Delta and Alitalia. These airlines are all under contract with Korean Air for cargo ground handling services in Incheon. Air France-KLM is one of the major carriers that operates its own freighters and handles a high volume of cargo. Korean Air provides customised service to its partners that meet its partners’ expectations at its base in Korea.

As for cooperation with alliance airlines, Korean Air says that it provides a seamless service to customers by sharing the SkyTeam cargo website.

Incheon Cargo Terminal
According to Korean Air, its Cargo Terminal 1 at Incheon Airport was established to serve as a logistics hub in the Northeast Asian region to meet its ever increasing demand for airfreight handling capacity. The facility has an annual 1.35 million tonnes cargo handling capability and was built along runway number one on a 65,604 square metres site. Cargo Terminal 1 has been playing a leading role in the region’s logistics flow since its inception.

The cargo terminal lies in the southern half of the cargo area located on the east side of the passenger terminal. The first terminal for Korean Air’s export and import handling was built in March, 2001.

Through the completion of the second extension construction in March, 2005 as well as that of the first phase in 2001, the cargo handling capacity increased up to 1.35 million tonnes per year. The second cargo terminal for OAL export handling opened in August 2007 and is fully operational. Additionally, depending on the flow of future traffic, an extra cargo terminal can be built using the extended planned space between No 1 and No 2 cargo terminal.

Based on its 30-year long-term plan, the three-phase construction of Incheon Airport started in 1992. The airport’s construction, now in its third phase, will be carried out between 2009 and 2020. Along with Northeast Asia’s fast development of air cargo, Korean Air’s Incheon cargo terminal is preparing to meet the various needs of logistics players.

Korean ACT freight
The Korean Air Cargo Terminal and Korea Airport Service (KAS) handled 1.26 million tonnes of international cargo in 2009, a 3.4 per cent decline compared with the 1.31 million tonnes handled in 2008. Mail handled in 2009 was 18,734 tonnes, up 21.3 per cent compared with the 15,449 tonnes of mail handled in 2008.

Focuses on providing customers with speedy and punctual service through the facilities which make them fully automated designated cargo terminals in stations both at home and abroad. Korean Air Cargo has dedicated cargo terminals with state-of-the-art cargo handling systems both in Incheon, as well as in other major cargo hubs including Tokyo, Osaka, Los Angeles and New York. These facilites include temperature-controlled coolers, freezers, vault rooms, and other state of the art equipment.

In some hubs Korean works with third party ground handlers in order to handle the large volumes of freight and to improve operational efficiency, as well as save costs.

Not only does Korea Airport Service operate in Incheon, it also provides services at quite a few domestic airports such as Busan and Gimpo. Besides cargo operations, KAS also provides overall airline operations including passenger, maintenance, catering and fuelling for other customer airlines.

Asked about the number of its customers at its Incheon Air Cargo Terminal, Korean Air says it serves 35 airlines. “In terms of cargo volumes, Korea Air Services (a subsidiary of Hanjin Group along with Korean Air), is handling 1.57 million tonnes, representing over 65 per cent of the total Incheon airport’s air cargo volume,” Korean Air says. Its service features include build-up/breakdown, loading/unloading, delivery of documents and cargo.

Within both cargo terminals, a Terminal Management System monitors all the procedures of its handling freights in tracking and tracing, and this results in a perfect cargo handling operation consistent with the C2K (Cargo 2000) concept. “The capacity of the cargo terminal facilities is sufficient for the current cargo volume, but we are now considering carefully when would be a suitable time for us to provide this hub with another terminal,” Korean Air said.

“Till now the capacity of the cargo terminal facilities seems enough for the time being to handle the current cargo volume, but we are now also contemplating carefully when it will be suitable for us to provide this hub with another terminal to satisfy our customers as business increases,” Korean Air says.

Sky-Bridge With Incheon air cargo terminal at the centre as the key traffic hub, Korean Air offers a sea, land, and air transportation connection service called Sky-Bridge, which provides ocean service from the Chinese ports of Shanghai, Tianjin, Qingdao, Dalian, Weihai and Yantai to the Korean ports of Incheon and Busan and vice versa. Using special 40-foot containers, the service provides through connection transportation from Incheon and Qingdao without breakdown at Incheon, which makes for safe and speedy service.

Korean Air’s Sky-Bridge service allows shipments to move by ocean from China to Korea and then by air to North America or Europe and vice versa. Through the programme’s efficiencies, the airline has lowered the average transit time between China and each corner of the world to less than one week – compared to 20 days by vessel.

Express service
Korean Air also has an express product, both for small shipments as well as large and heavy shipments. The express service is for airport-toairport for small shipments – parcels up to 30 kilogrammes per piece as well as shipments up to 300 kilogrammes.The airline also provides a guaranteed boarding airport-to-airport service for medium to large shipments.

The airline said it handled 30,678 tonnes of small and large shipments last year.

IT system
Having developed and adopted various types of IT systems, Korean Air’s focus has been to utilise these systems to advance and support all cargo handling processes.

“Korean Air has participated in e-freight since 2008 and adopted it for over 20 destination airports around the world, making us the number one cargo carrier handling the highest quantity of e-freights for both domestic and international operations,” the airline said.

As a founding member of Cargo 2000, Korean Air has actively led the project. “Last year, we created our own Cargo 2000 Data Management Platform (CDMP) and have been measuring the quality of performance of all freights. By adopting the global standard of Cargo 2000 to our internal measures, we continue to offer our customers enhanced quality service,” Korean Air said.

Way forward
Putting aside the recent global financial crisis and the worldwide recession last year, Korean Air says it is optimistic of the future and focusing on its goal of maintaining its position as the world’s number one commercial cargo carrier.

Korean Air flies passengers and cargo to 117 cities in 39 countries. Passenger destinations include Beijing, Cairo, London, Los Angeles, New York, Sao Paulo, Sydney, Tel Aviv, Tokyo, Ulan Bator, Mongolia and Tashkent,Uzbekistan.