South Korea's transport ministry has spanked Korean Airlines (KAL) with a cutback of 20% in domestic flights. For the next six months, KAL cannot operate 138 weekly flights on 10 of its best domestic routes and must suspend two of its 28 weekly flights to Tokyo. The carrier stands to lose 40 billion won (US$37 million) in revenue from these cuts, the harshest sanction Seoul has ever imposed.

Officials are responding to a surge in safety mishaps that started with KAL's crash on Guam a year ago. In the past two months KAL has had seven non-fatal accidents, including the loss of a Boeing 747-400 that skidded off a runway. One South Korean newspaper claims KAL's restructuring during the past year has contributed to its deteriorating safety record. The Korea Times notes that KAL encouraged 300 experienced mechanics to retire early, shortly before the airline had a raft of maintenance-related accidents. Pilot error caused another three accidents, which the paper says could be because KAL pilots log the second highest flying hours of the world's top 20 airlines. The paper also blames lax government oversight.

The airline is already reeling from Seoul's decision to abolish route award guidelines and open all routes to multiple designation. Those guidelines had insulated KAL from rival Asiana Airlines in many markets. Some sources say KAL's sanctions fit Seoul's broader plan to reposition KAL on medium and long-haul routes, while encouraging Asiana to fly more domestic and regional routes. Publicly, KAL seems contrite about its sanctions and even upbeat over its longer-term prospects. It talks of being "reborn".

The first stage in that rebirth is a 150 billion won upgrade of safety systems and procedures, including enhanced warning systems and extra training of cockpit crews. KAL has retained Delta Air Lines as safety and training consultant.

KAL plans to reduce its fleet over the next year while cutting fleet age from 7.9 to 7.0 years. By the end of this year it hopes to sell six Boeing 747 classics and two McDonnell Douglas MD-11s. The airline will return other older jets as leases expire and plans to add 26 new aircraft between now and the end of next year.

Network plans continue to emphasise routes out of Asia, at least until the area's fortunes improve. With declining passenger numbers, KAL has shifted to more cargo flights and hopes to launch a Miami freighter next year, and perhaps a cargo route via Los Angeles to Mexico.

Source: Airline Business