Korean Air (003490.KS) is accelerating fleet modernization and operational efficiency measures ahead of the December launch of its merged carrier with Asiana Airlines (020560.KS). The airline is bringing in 103 next-generation aircraft from Boeing as part of that push.
Korean Air said on the 16th it had signed a $36.2 billion contract with Boeing for 103 next-generation aircraft at the Conrad Seoul hotel in Seoul's Yeongdeungpo district. The carrier also agreed to buy 21 spare aircraft engines from GE Aerospace and CFM International, and signed a 15-year engine maintenance service agreement with GE Aerospace covering 28 aircraft. Those deals are worth a combined $8.6 billion.
The contracts follow a memorandum of understanding that Hanjin Group Chairman Cho Won-tae signed in Washington in August last year, when he joined an economic delegation to the United States. Korean Air said at the time it planned to purchase $44.8 billion worth of aircraft, aircraft engines and maintenance services.
"I find it deeply meaningful that the commitment we made in Washington last year has come to fruition as a final contract," Cho said at the signing ceremony. "This contract goes beyond a simple business-to-business transaction. It is a milestone of trust that further strengthens the solid economic and technological alliance between Korea and the United States."
The investment is expected to speed up Korean Air's strategy of becoming one of the world's 10 largest carriers on the back of its merger with Asiana Airlines. The order includes 20 Boeing 777-9s, the U.S. planemaker's next-generation flagship long-haul wide-body passenger jet, along with 25 787-10s, 50 737-10s and eight 777-8F freighters.
Korean Air currently operates 166 aircraft, a total that will rise to about 230 after the Asiana merger. The combined airline's passenger capacity will grow by more than 55% from current levels and cargo capacity by more than 10%, placing it around 15th globally in passenger traffic, fifth in cargo and 10th overall.
The carrier is also pressing ahead with efficiency and profitability measures tied to the merged airline's launch on Dec. 17. In the passenger business, it will optimize flight schedules by trimming overlapping routes and strengthening connections. It also plans to ramp up sales of higher-margin flights originating in the Americas. In cargo, the airline will expand capacity by absorbing Asiana's belly cargo capability on passenger jets, while dedicating its existing freighters to higher-yield markets.
After the merger, the combined Korean Air is targeting annual revenue of about 23 trillion won and expects to generate roughly 300 billion won in synergies each year.
Korean Air is also expanding its network, securing year-round traffic rights for the Incheon-Ulaanbaatar route from the Ministry of Land, Infrastructure and Transport a day earlier, with two flights a week. The merged carrier will serve about 120 cities.
"We will continue to strengthen our future competitiveness through the introduction of next-generation aircraft and cooperation with global partners," a Korean Air official said of the investment. "We will also contribute to greater exchange and economic cooperation between Korea and the United States."
