Arm of South Korean flag carrier feeling effects of decline in aircraft production in the wake of global downturn

Korean Air (KAL) Aerospace is considering launching a Boeing 747-400 passenger-to-freighter conversion programme and is in talks with Airbus for A380 work as part of efforts to offset a decline in airliner production rates.

The South Korean flag carrier's manufacturing division builds a range of commercial aircraft components and subassemblies including Boeing 717 nose sections, 737 and 747 composite flap-track fairings, and fuselage panels for the Airbus A330/A340 and Embraer 170/190 families.

The company also produces military aircraft parts and performs maintenance and modification work for the South Korean and US armed forces.

It needs more work, however, as its Busan factory is operating at only about 50% capacity, says Aerospace division vice-president international marketing and contracts June Chul Choi.

The company has been hit by the decline in aircraft production rates caused by the global economic downturn. Choi says 717 production is running at just one aircraft a month, while the 747 is down to 1.5.

A team of 12 engineers assigned to the 747-400XQLR project recently returned to South Korea after Boeing failed to sign Singapore Airlines as launch customer and delayed a go-ahead decision. KAL Aerospace has been selected to supply the aircraft's raked wingtip extensions.

Although the division is still in talks with Airbus about participating in the A380 programme, it has ruled out a risk-sharing stake.

"We are still discussing it with Airbus," says Choi. He adds the company is interested in taking on subcontracts to produce composite components such as aerodynamic fairings.

South Korea's principal aerospace manufacturer, Korea Aerospace Industries (KAI), is, meanwhile, negotiating to take a1.5% stake in the A380 and will manufacture lower outer wing skin panels.

Revenues at KAL Aerospace have declined steadily from 270 billion won ($225 million) in 1999 to 213 billion won last year, although profit has increased from 12 to44 billion won during the same period.

The South Korean government is trying encourage KAL to fold its manufacturing business into KAI but the two companies say no agreement has been reached.

Source: Flight International