Korean Air Sees Corporate Business Growth After Year One with Delta

Korean Air's Bo-Young (Daniel) Song talks:

• Progress of joint corporate contracts with Delta
• Reducing first class service on certain routes
• Time line for full fleet Wi-Fi

It's been about a year since Korean Air implemented its joint venture with Delta, and Korean has reported significant growth in corporate business and contracts as a result of the partnership. Korean Air managing VP of passenger network and sales Bo-Young (Daniel) Song updated BTN transportation editor Michael B. Baker on the JV, as well as some of Korean's plans for premium products, route growth and future partnerships.

BTN: How are things progressing with Delta?

Song: We did activities with Delta for cooperation, [based on] three pillars: commercial synergy, culture and customer experience. The concept of a joint venture is metal neutrality. We aligned many important commercial bases like pricing, the network and revenue management. Since last year, we have completed over 1,000 joint corporate contracts. Also, 300 additional contracts will be added this year. These generate more Korean corporate sales. During the year, we generated these corporate sales by 20 percent up, compared with last year. Also, we tried to foster JV culture, sharing best practices, knowledge sharing. We exchanged our manpower to their headquarters, and some came to Korea. We have launched advertisements as one JV brand. In Korea, we had several joint cultural activities: JV day in Korea, tree planting in Mongolia and exchanging their best practices in commercial areas like cabin and sales and other sections. We have started to study seamless service in each customer journey point. We have eight working groups to discuss and align well and to share our culture, and both sides agreed to make a new customer experience working group to align our customer experience and to close potential seams in the customer journey. There was growth of about 9 percent [year over year JV revenue growth for the period from May 2018 to April 2019]. Also, [premium] class load factors were 6 percentage points up [to 68 percent]. We also launched new markets, good examples of cooperation of Delta and Korean Air: We operate to Boston, but we have to utilize Delta's good connection in Boston. We are using the sales capacity in the New England area and Minneapolis. Now, both routes have high load factors, more than 86 percent. So we had a good start on both new routes.

BTN: Are there any advantages to connecting in Seoul over the other two major transpacific JVs—United/ANA and American/Japan Airlines—both of which connect in Japan?

Song: The biggest advantage to our customer in the United States: We have 40 Incheon-beyond [codeshare] routes to South Asia, not [including] China. Also, at Incheon Airport, Delta and we are enjoying very short connecting times: 45 minutes at Incheon for transit to South Asia. It's less congested at Incheon Airport. Also, we had 480 [codeshare routes connecting in U.S. cities onward].

BTN: What other work is being done at the airport level?

Song: Regarding co-location of our airport service at Incheon, we have a minimum connecting time, and we had done [co-location] at the Seattle airport first. We moved to Delta's check-in area for Microsoft and the corporates. We just have done one co-location at Seattle, and we are going to do more: Atlanta, Incheon and other areas. At Incheon airport, it is still ongoing. In Seattle, we had a similar departure time to Incheon, so we moved earlier and Delta moved to the evening time. Also, at Atlanta, both our departure times were similar, so we moved to morning and Delta moved to late night. These are actions to give more choice to our customers.

BTN: What's happening with Korean Air's premium products?

Song: Korean Air is reducing first class service on major routes, but we will maintain our first class policy as a luxury airline. We maintain this service on commercial routes like New York, Atlanta—U.S.-based cities—as well as major commercial cities in Europe. We will extend two-class service to major routes like Barcelona and Vancouver, which means we want to provide more business class seats for our customers where first class demand is low. Now, we have just Economy Plus. In A220-300, in very limited capacity [we had] Economy Plus in certain routes like domestic and Japan routes, but we decided to stop that Economy Plus because it's difficult to align our service. Now, we are considering premium economy instead of that.

BTN: What new routes are you looking to add?

Song: This winter, we are going to add [capacity to] Nha Trang, a new, hot city in Vietnam. Already, we have [Seoul] to Hanoi and Ho Chi Minh with three daily and Da Nang two daily. We want to develop [charter flights to] a new city in Vietnam, Da Lat; it's a good location. Also, Chiang Mai in Thailand. We already have three daily to Bangkok, so we want to add Chiang Mai on the capacity side. This year, we are going to launch new Chinese destinations: Hangzhou and Nanjing and Zhangjiajie, a major area that has big mountains. Basically, our strength to our network is to support the JV expansion, so we are going to add more frequency to hot destinations. We are going to try to develop [charter flights to] new markets like Athens and Oslo. In the winter season, we want to develop [charter routes to] the Middle East, like Cairo and Jordan. We start on a charter basis to get a market, then we open regular flights.

BTN: Do you foresee developing closer cooperation with any of your other SkyTeam partners?

Song: We have two or three partners on SkyTeam [with which] we want to discuss cooperation, [like] Vietnam Air. Korea and Vietnam—the demand [between] both countries has increased by 700 percent [between 2008 and 2018] because many Korean companies have invested in that area. These hot routes and hot markets for us and Vietnam Air—we are going to discuss how to develop those. Also, we want to find one more partner like Delta for Europe. It should be Air France-KLM, personally, I think.

BTN: What is your progress on Wi-Fi instillation?

Song: We plan to install Wi-Fi service in Max and Neo [aircraft]. As new aircraft comes, these are installed for the service, and we are going to [add it to our] current aircraft. We are going to start the aircraft [on] commercial routes first. [Within three years], we will provide Wi-Fi service to all aircraft.