Korean Carrier Moonlights in Aerospace

In Korean Air's research-and-development section, engineers are developing a commercial satellite and a rocket and have their eyes on building South Korea's own commercial passenger airplane.


At a 170-acre complex dotted with more than two dozen hangars, Korean Air operates a little-known aerospace division that develops rockets and satellites and makes parts for commercial and military aircraft.

It is the only airline in the world that also has an aircraft manufacturing business.

Even within the U.S. aerospace industry, few are familiar with the breadth of the business here, where parts for Boeing's 737, 747 and 777 and Airbus' A330, A340 and forthcoming A380 super-jumbo jet are manufactured.

The Korean Air unit also will be a supplier for the 787 Dreamliner, Boeing Co.'s first new jetliner model in a decade. The plane will be delivered to airlines starting in 2008.

The division refurbishes U.S. military aircraft, including F-15 and F-16 fighters and UH-60 Black Hawk and CH-47 Chinook helicopters, that operate out of bases in Asia.

In Korean Air's research-and-development section, engineers are developing a commercial satellite and a rocket and have their eyes on building South Korea's own commercial passenger airplane. About 2,400 engineers and mechanics work at the Gimhae complex.

"Unique" is the word Richard Aboulafia, an analyst at research firm Teal Group Corp. in Fairfax, Va., uses to describe Korean Air's operations. "Not many people know about it, but they're doing a bunch of work."

The aerospace division grew out of the South Korean government's call in the early 1970s for an indigenous military aircraft developer. It started by making military helicopters under license for McDonnell Douglas Corp., which was later acquired by Boeing.

Korean Air expanded into commercial aircraft by negotiating with Boeing and Airbus to sell them parts from its aerospace division in return for buying their planes.

The operation is in many ways an outgrowth of \o7chaebol\f7, the family-controlled conglomerates that dominate South Korea, Aboulafia said.

Korean Air, for instance, is part of Hanjin Group, which has interests in air, land and sea shipping. Hanjin was founded by the father of the airline's current chairman shortly after World War II as a trucking service for the U.S. Army.

In theory, if not yet fully in practice, Korean Air could become a classically vertically integrated company, serving the industry and its passengers from assembly to flight and even to the decommissioning of planes when their flying days are over.

The aerospace division could build a plane that the airline could fly. Korean Air's maintenance division -- one of the largest in the world, serving more than 30 carriers -- could maintain and repair the aircraft.

The airline also operates a large catering business that supplies food for many carriers that fly to its hub at Incheon Airport in addition to its own planes. After landing, passengers stay at one of several hotels the airline owns, including the Hyatt Regency next to the airport.

When a plane becomes too old to operate, it could return to a hangar here next to where it was built. Workers gut and rebuild out-of-service Boeing 747s into nearly new freighters for Korean Air's cargo business, currently the world's largest.

There is only one kink in the supply chain: Korean Air has to buy jet fuel from other suppliers. That may not be an issue for long, though. The airline, with affiliate Hanjin Shipping Co., is making a bid for South Korea's third-largest oil refinery.



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