Paul Lewis/SEOUL

SOUTH KOREA has long been recognised as one of the economic miracles of Asia. In the 43 years since the end of the Korean conflict, the country has emerged as a major industrial producer. Having propelled itself to the forefront of the shipbuilding, automobile and electronics industries, South Korea now aims to be among the world's top ten aerospace manufacturers by 2005.

South Korean industry is perusing a broad range of civil and military aerospace projects as either indigenous or international collaborative efforts. They span commercial passenger aircraft, trainers and light combat jets, helicopters and remotely piloted vehicles. How many of these ambitious plans ever get off the ground remains to be seen, however.

The country's main industrial conglomerates, or "chaebols", are all relative newcomers to aerospace. The Hanjin Group-owned flag carrier Korean Air was the first to throw its hat into the ring with the creation of an aerospace division in 1976. It was followed by Samsung in 1977, Daewoo Heavy Industries (DHI) in 1984 and, more recently, the Hyundai Group.

Aerospace still remains a secondary activity when weighed against the more traditional industrial interests of the chaebols. For Hanjin, aerospace accounts for only 8.4% of total production, while almost two-thirds of Samsung Aerospace's revenue comes from cameras, machinery and armoured vehicles. DHI's aerospace and defence business is even smaller, representing just 4.5% of total sales in 1994.

Seemingly undaunted by the heavy investment required of newcomers and the small long-term returns which are generated, the four competing chaebols are each determined to lead South Korea's push into aerospace. They are driven by a thirst for technology and cut-throat corporate competitiveness.


The cornerstone of South Korea's aerospace ambitions for the past two years had rested on a planned 100-seat regional-jet joint collaboration with China. The proposed joint venture formed part of a wider-ranging memorandum of understanding (MoU) on industrial co-operation signed by Seoul and Beijing in October 1994.

There followed 18 months of fruitless negotiations between Aviation Industries of China (AVIC) and the 14-member Korean Commercial-Aircraft Development Corporation (KCDC). In the end, Chinese demands for programme leadership could not be reconciled with South Korea's wish to have its own assembly line.

"The MoU said that equity and workshare should be shared evenly, and that leadership of the programme would be co-ordinated with each other," says Korean Air executive vice-president Yi Taek Shim. "The reality was that China did not want to have shares with Korea."

After reaching a deadlock at the end of 1995, AVIC signalled its growing impatience with the KCDC by signing a bilateral MoU to co-operate with Singapore Technologies (ST) in February. The break finally came in June, when China unilaterally selected Aero International (Regional) (AI(R)) as its Western partner and presented South Korea with a humiliating take-it or leave-it share offer of just 12.5%.

The KCDC has since fractured, with Samsung now pursuing a takeover of bankrupt Dutch manufacturer Fokker and Korean Air and Daewoo mulling alternative international collaborative ventures with either AI(R) or Saab. Despite its setback at the hands of the Chinese, South Korean industry appears more determined than ever to be a force in aerospace.

"We will see a programme launched within this year," declares Thomas Byun, managing director of Samsung's commercial aircraft programme. He adds: "The reason it has taken us so long is maybe because we didn't understand fully the nature of the business. We've had a good lesson over the last two to three years and now have a much better understanding."

Under Samsung's proposed rescue plan, it would take a 70% stake in a relaunched Fokker, in return for the Dutch Government and the new owners of the company's former spares support business each committing to a 15% involvement. Production of the existing Fokker 50 turboprop and Fokker 70/100 twinjets would continue in the Netherlands (Flight International, 16-22 October, P5). It would need the support of a third party to provide financing for new sales and leases. "We do not have a guaranteed domestic market in Korea. We would need to sell outside of the country, and in order to do that you need to be very competitive, both economically and technically. That is our biggest challenge," acknowledges Byun.Ê The planned buy-out now being discussed is strictly a commercial deal between Samsung and the Dutch and does not involve the other chaebols. Samsung, however, recognises that simply inheriting the existing Fokker product line does not make financial sense in the long term, unless a significantly larger investment is made to develop a follow-on aircraft.


Samsung's interest appears to be focused on resurrecting the former Fokker 130 programme in one form or another. The cost is estimated at anywhere between $1.2 billion to complete development of a larger Fokker 100 derivative, and $2.5 billion for an all- new aircraft. In either case, Samsung will almost certainly be looking to the South Korean Government for financial help.

Seoul's earlier offer to underwrite 50% of KCDC's share in China's AE-100 programme hinged on the aircraft being a national programme involving the three main chaebols and there being a South Korean final assembly line. The Government's position is not thought to have changed, and it is likely to insist on the inclusion of Korean Air and Daewoo before handing over any money.

Whether there is room for either Korean Air or Daewoo "-depends on the attitude of Samsung", suggests Shim. "If they stick to the original understanding we had incorporating the other companies, then we can direct our activity in one direction, but as long as they pursue their own interests, then we can not really help them." In the absence of any co-ordinated approach on the issue of Fokker, Korean Air and DHI continue to look at alternative future programmes. One possibility under consideration is to partner AI(R) in the development of a planned new 70-seat regional jet to rival Bombardier's CRJ-X.

While the European consortium has stated a willingness to offer foreign partners up to a 40% stake in the AIR 70, it has told South Korea that the aircraft will be produced in Toulouse. In the absence of any change in the Government's policy of linking state aid to local assembly, any South Korean participation in the programme would have to be on a private basis.

Saab is also discussing co-development of 70-seat aircraft, but wants South Korea to take the lead. "Saab's participation would be low level. Their attitude is, if Korea develops a 70-seat jet, then they will help with engineering and technology and allow us final assembly," says Shim.

Korean Air and Hyundai are, in the meantime, focusing on fulfilling their private commitments to the McDonnell Douglas (MDC) MD-95 programme. Korean Air's Pusan plant plans to produce 650 nose sections for the aircraft, using jigs and tools transferred from MDC's Hunting Bridge factory in California. The first shipset is due in April 1997.

Hyundai's recently created Space & Aircraft company has an agreement with MDC to supply a similar number of wings for the MD-95.

Hyundai takes responsibility

The Halla group had originally intended to do the work, but in February transferred responsibility to Hyundai. According to Hyundai senior manager Sang-Ki Choi, the company is investing a total of $677 million in the programme, including $414 million on the construction of a new wing manufacturing plant at Sosan. With its new plant not due for completion until 1999, Hyundai has subcontracted its work to Fleet of Canada and the Spanish Andalucia group.

Much of the funding invested in the South Korean aerospace sector over the past 20 years has come from the military. Korean Air initially cut its teeth licence-manufacturing MDC MD500 scout helicopters and, later, Northrop F-5E/F fighters. Samsung was given its kickstart assembling the F-5's General Electric J85 engine, while DHI started by building F-16 fuselage mid-sections and, more recently, P-3 wings for Lockheed Martin.

As a follow-on to 36 Lockheed Martin-built Block 52 F-16C/Ds delivered to the South Korean air force in the mid-1980s, the Government in 1991 launched the Korean Fighter Programme (KFP). The $5.2 billion deal involves the kit-assembly of 36 Block 52 F-16s by mid-1997 and licence-production of a further 72 aircraft by December 1999.

Prime contractor Samsung is responsible for the final assembly of both F-16 airframes and Pratt & Whitney F100-229 engines at its Sachon plant. DHI's nearby Changwon factory supplies the aircraft's centre fuselage, while Korean Air produces the aft fuselage, wings and control surfaces at Kimhae. Other KFP partners include Hyundai.

With just over three years of F-16 production remaining, South Korean industry is anxiously soliciting air force support for follow-on local programmes. "Korea cannot remain as a technical licence-manufacturer, we have to develop our own indigenous aircraft," argues Duck-Joo Ra, managing director of DHI's Aerospace Research and Development Centre.

DHI is pinning its hopes on an air force go-ahead to put the KTX-1 turboprop basic trainer into production by 1999. The tandem-seat aircraft has been under development since 1990. A Pratt & Whitney Canada PT6A-62-powered pre-production prototype is due to be flown in early 1998.

A more ambitious indigenous development will be the planned KTX-2 advanced jet trainer/light combat aircraft. The supersonic tandem-seat jet will be powered by a single 71kN (16,000lb)-thrust turbofan and share a high degree of subsystem commonality with the F-16. Samsung has already signed a provisional teaming agreement with Lockheed Martin and wants to begin full-scale development of the aircraft in 1997. The programme, however, faces a delay unless South Korea's defence and finance ministries succeed in reaching a consensus on funding the $1.5 billion development and extracting guarantees from Washington on technology transfer and export sales (Flight International, 11-17 September).


South Korean efforts at pioneering a home-grown helicopter have so far met with little success, despite 20 years of experience either sub- assembling or licence-producing Bell 212/412, MD500 and Sikorsky S-70 machines. Given the long-term need to replace the large number of military and civil helicopters now in service, industry executives are still hopeful that a programme will eventually get off the ground.

Korean Air has for several years been pushing for the development of the 3.5t-class Korean Multipurpose Helicopter. The six- to seven-seat machine is being promoted as a combined civil and military replacement for MD500s, 300 of which were built for the Korean army. "Given at least six to seven years development, everyone believes we need to start now," says Shim.

At the same time DHI is continuing to try to breath fresh life into its own six-year-old Korean Light Helicopter programme. It was originally intended to base the helicopter on a co-produced version of either the Agusta A109 or Eurocopter BO105. The army, however, has dragged its feet on funding and has now cut back the programme to as few as 12 helicopters.

In February, Samsung further strengthened its nine-year-old relationship with Bell Textron by taking a stake in co-developing the planned Bell 427 helicopter. Samsung, with a consortium of 37 other South Korean manufacturers, will have part responsibility for fuselage production and marketing in Asia.

South Korea's aerospace industry has come a long way in the past two decades. How much further it can go will, over the next ten years, largely depend on the Government's ability and resolve to reconcile the overlapping and often conflicting interests of DHI, Korean Air and Samsung. On this point, the chaebols appear to be at one.

"The Government has to give direction and get companies to work together towards the same goal," says Ra. "With the long-term support of the Government, we can make it a viable business," adds Byun."We have to develop a masterplan, if we are to become one of the top ten countries in aerospace by 2005, but I think we may need more time," concludes Shim.

Source: Flight International