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About this report

Reporting standards GRI 4.0

Reporting period 2016.1~2016.12

Reporting boundary Korean Air’s business premises at homeand abroad, including the headquarters in Seoul

Reporting cycle Every year

Third-party assurance Korea Productivity Center

Significant changes •Reporting activities conductedfrom the previous year in line with the UN’s Sustainable

Development Goals

•Issuing the report in an interactive PDF format replacing a printed version

Furtherinformation

Contact information

Korean Air Environment Team

[email protected]

02)2656-5512

http://kr.koreanair.com

https://twitter.com/KoreanAir

http://facebook.com/KoreanAir

http://blog.koreanair.com/

http://blog.koreanair.com/

http://facebook.com/KoreanAir

https://twitter.com/KoreanAir

https://kr.koreanair.com/global/en.html

33

CoNTENTS

4Photo by Jung Hyun-jin in obertraun, Austria – Among selections during the 23rd Annual Korean Air Travel Photo Contest

Introduction 05

06

08

10

11

12

13

BOARDING PASS

Austria is a landlocked country located at the

center of continental Europe. Its total land area is

smaller than that of South Korea, and two-thirds

is a mountainous region spanning the eastern

Alps. With a population of 8.45 million and a per

capita GDP of 37,000 euros, it is one of the richest

countries in the world. obertraun is a quiet Alpine

lake town with a stunning natural landscape.2017 Korean Air sustainability report

Austria

5

Letter from the CEO

Distinguished stakeholders,

In 2016, Korean Air achieved an operating profit of KRW 1.079 trillion thanks in part

to an improved business environment reflecting the downward stabilization of inter-

national oil prices and expansion of air travel demand, but also to the hard work and

dedication of Koran Air employees and the unwavering support from stakeholders.

Despite management challenges posed by global economic uncertainties such as

US interest rate hikes and the UK's Brexit vote, our stakeholders’ ongoing support and

interest helped us to achieve this considerable surplus, for which I am deeply grateful

to all of you.

Korean Air has strived to provide safe air travel and high-quality service to our cus-

tomers. Our unceasing efforts at improvement and innovation have helped to us

grow into a leading global airline.

In 2017, Korean Air is aiming to achieve KRW 12 trillion in sales under a management

policy of establishing a sustainable business structure that generates profits even in a

rapidly shifting business environment. We will continue our pursuit of safety, custom-

er satisfaction, and shareholder value.

Firstly, safety is our top priority, and this is irreplaceable.

We promise to safeguard our customers during flight by focusing all of our capa-

bilities. Our internal safety guidelines have been updated to provide a basis for our

utmost efforts to prevent in-flight disturbances and sternly respond to other acts that

could hamper flight safety.

Customer happiness is the loftiest value that Korean Air pursues.

We will continue our efforts to provide customers with the highest level of satisfaction

by offering segmented and differentiated services tailored to evolving customer needs.

In addition, efforts will also be made through management by communication to cre-

ate a positive corporate culture that can in turn inspire happiness in our customers.

Shareholder value will be further promoted.

This year, concerns remain surrounding US interest rate hikes, fluctuations in the Ko-

rean won exchange rate against major currencies, and rising oil prices. To actively

respond to such challenges, next-generation aircraft will be utilized for operational

efficiency, and productivity will be increased through improved business processes.

The Boeing B787-9, introduced to Korea earlier this year, is a next-generation aircraft

boasting significantly higher fuel efficiency and an improved cabin environment. It

is an eco-friendly airplane with a greatly reduced carbon footprint. The B787-9 is ex-

pected to be used for exploring routes with a high growth potential and to increase

sales, thereby contributing to shareholder value and raising Korea’s national compet-

itiveness.

Sustainability management is every company's responsibility and a com-

mitment we make to society and our customers.

Our efforts to achieve 'Excellence in Flight' will continue based on the establishment

of a stable profitable base by adhering strictly to the fundamentals of safety and ser-

vice and by responding to challenges with agility.

At the same time, we will focus on communicating with our stakeholders so that

social value can be created and shared. Korean Air will remain a trusted friend who

brings happiness and joy, and we look forward to your advice and support. Thank you.

August 2017

Cho Yang-ho

Chairman & CEO Korean Air

6

Company overview

ProfileEstablished in 1969 and celebrating its 48th anniversary this year,

Korean Air has grown into a global carrier with 160 aircraft as of the

end of 2016. In addition to passenger and cargo transportation ser-

vices, its business scope has expanded to now range from in-flight

meals and duty-free shopping to the aerospace industry, including

aircraft parts development and maintenance.

Operating revenue by business(KRW 100 million) Air fleet (aircraft)

Aircraft type Passenger Cargo

A380-800 10 -

B747-8I 7 -

B747-400 6 13

B747-8F - 7

B777-300ER/300/200 38 -

A330-200/300 29 -

B777F - 11

B737-800/900/900ER 39 -

Total : 160 129 31

* Executives, expatriates and locally-hired and temporary employees included

2014 2015 2016

Air Transportation ** 107,929 103,011 105,056

Aerospace 7,965 9,135 8,989

Catering 910 938 984

Total 116,804 113,084 115,029

** The air transportation revenue includes Hotel & Limousine operations, where Ko-rean Air made in-kind contribution through its subsidiary, Aviation Total Services co., ltd. (Same classification applicable to the Audit Report)

Air Transportation

105,056

Aerospace

8,989

Catering

984

Operating Revenue in 2016

KRW 11,502 billion

Transportation in 2016 (10,000 passengers / 10,000 tons)

Passengers Cargo

International routes 1,898 150

Domestic route 786 7

Total 2,684 157

Company name Korean Air Lines Co., Ltd.

Headquarters 260 Haneul-gil Gangseo-gu, Seoul, Korea

Phone number 02-2656-7114

Website http://www.koreanair.com

Business areasPassenger & cargo transportation, aerospace,

catering services and in-flight sales

Sales KRW 11,502 billion

Employees 20,956 *

Air Fleet 160 aircraft

Routes 132 cities in 46 countries

Revenue passengers

carried in 201626.84 million

Revenue freight

carried in 20161.57 million tons

SubsidiariesSee the disclosures by Korean Air on http://

dart.fss.or.kr

(As of Dec. 31, 2016)

7

Sao Paulo

Los Angeles

New York

AtlantaDallas

San Francisco

Seattle

Washington D.C.

Honolulu

Las Vegas

Miami

Lima

Anchorage

Vancouver

Toronto

Houston

Chicago

Brisbane

Auckland

Nadi

MadridZaragoza Rome

GuamCebu

DubaiRiyadh

Jeddah

Nairobi

Male

ColomboKuala Lumpur

JakartaDenpasar

Kathmandu

Mumbai

Irkutsk

Tashkent

Tel Aviv

CairoHanoi

Chiang Mai

Siem Reap

Ho Chi Minh

Da NangPhnom Penh

PhuketPenang

ManilaNha Trang

TaipeiHong Konng

Palau

Navoi

Ulaanbaarar

Singapore

Yangon

Istabul

Vladivostok

Bangkok

London

BaselParis

Amsterdam

oslo

Kobenhavn

Praha

ViennaFrankfurt

ZurichMilan

Moscow

Saint PetersburgStockholm

Sydney

Destinations in Southeast Asia

24 cities

Destinations in Europe, Middle East and Africa

27 cities

Destinations in Americas

19 citiesDestinations in Japan

16 cities

Destinations in Korea

13 cities

Global NetworkSKYTEAM SkyTeam, a global airline alliance formed in June 2000, currently consists of 20 member airlines, including Korean Air, Garuda Indonesia,

DELTA, MEA, Vietnam Airlines, SAUDIA, XIAMENAIR, AerolineasArgentinas, AERoMEXICo, AERoFLoT, Alitalia, AirEuropa, AIRFRANCE, China Eastern, China

Southern, China Airlines, Czech Airlines, Kenya Airways, KLM, and TARoM. Every day, 17,000 SkyTeam flights take off for 1,062 destinations in 177 countries.

This global network allows customers multiple flight options on member airlines and wider benefits, such as earning and redeeming mileage and using

airport lounges and joint services provided by all member airlines. In addition, SkyTeam members clearly recognize the importance of corporate social

responsibility, and are collaborating to promote sustainable, green corporate policies.

Destinations in China

29 cities

Destinations in Oceania

4 cities

Flight Routes As of December 2016, Korean Air is operating passenger

and cargo routes between 13 cities in Korea and 119 cit-

ies in 45 countries worldwide. The infrastructure we have

established around the globe will provide a basis for syn-

ergy effects in related businesses, and furthermore will

raise the international profile of Korea.

Passengers and cargo

Cargo-only

Korean Air Flight Route Map

8

Vision & Management Philosophy

Operational Excellence

•�Putting safety as the first priority

in operation

•�Improving profitability through

year-round cost reduction efforts

•�Modernizing fleet continuously for

higher operational efficiency

• Expanding a global network by

tapping into SkyTeam resources

•�Strengthening management

infrastructure with company-wide

IT integration

•�Promoting education/training

programs for fostering talent from

around the globe

Service Excellence

•�Strengthening service

competitiveness by developing

Korean Air’s original services

•�Offering high-end and differentiated

services

• Providing high-end seats such as

KOSMO Suites and Prestige Sleepers,

and upgrading AVOD/IFE

•�Enhancing corporate image as a

global leading service brand

•�Offering top-tier service on a par

with global standards backed by the

SkyTeam alliance

•�Continuing social contribution

activities through Global CSR projects

Innovative Excellence

• Establishing a corporate culture that encourages creativity and free thinking

•Creating a democratic and collaborative workplace

•Fostering talent from around the globe

•Removing the silo effect and promoting change and innovation

•Developing profitable new business models

Vision Mission

To be a Respected Leader in the World Airline Community

EXCELLENCE IN FLIGHT

OPERATIONALEXCELLENCE

SERVICEEXCELLENCE

INNOVATIVEEXCELLENCE

9

Vision & Management Philosophy

Management Philosophy

Change-embracing Management

Creating an innovative and change-embracing corporate culture•�Encouraging to have a progressive and aspiring mind

•�Creating an organizational culture that embraces change

•�Pursuing future-oriented business reform by focusing on core competences

System-based Management

Operational management based on expertise and autonomy

•�Promoting a mutual respect of expertise

in different fields

•Making a system-based decision

•�Building a harmonious atmosphere

for creative solutions

Adhering to standards and principles•Establishing globally-recognized standards and principles

•Pursuing standard and principle-based flexibility in business

•�Eliminating shortcuts and inefficiency in business operations

Principle-based Management

Developing future growth engines with competent human resources

•Attracting the best and brightest from around the globe

•Continuing a bold investment in nurturing talent

•�Creating a corporate culture that pairs individual

competency-building with organizational growth

Talent Recognition

Enhancing customer loyalty with highest possible customer satisfaction

•�Taking a comprehensive and systematic

approach toward customers

•�Responding promptly to changing customer needs

•�Maximizing the customer value through Management by

Wandering About (MBWA) practices

Customer-oriented Management

10

Sustainable Value Chain

Output • Monthly operating hours per

aircraft: 346 hours/month

•operation ratio

80.7%•Sales

KRW 11,502 billion

•operating profit

KRW 1,079 billion

•Benefits distributed to stakeholders

KRW 6,797.2 billion

•Personal information leakage:

Zero case

•A ban on transportation of shark fins

•Greenhouse gas (GHG) emissions

13,394,508tCo2

•Amount of reduced GHG emissions

413,613 tCo2

•Global afforestation

- Baganuur, Mongolia 44ha

110,000trees

- Kubuqi, China 461ha

1,360,000 trees

R & D Planning Scheduling Marketing & Sales Pre-departure In-flight Arrival After-sales service & analysis

Major Activi-

ties

•New routes (aviation agreements, slot, market research, demand forecast, and profitability analysis)•Customer service• Special cargo service • In-flight meals•Aerospace R&D

•Flight route planning•Maintenance planning•Material planning•Flight operation planning•Crew planning

•Aircraft scheduling•Scheduled maintenance•Flight Planning•Crew scheduling

•Pricing policy/strategy•IT service offering• Load factor management•Cargo sales•Advertisement •Marketing•Branding strategy•Travel agency programs

•Maintenance •Refueling• In-flight meals loading•Cargo loading• Baggage loading•Passenger check-in •Airport lounge service• Dangerous goods handling

•operational control - Air traffic control - Aviation weather - Aviation communication• In-flight service

- In-flight meals - In-flight entertainment - In-flight duty-free shop

•Baggage check-in service• Transfer service•In-flight cleaning/disinfection

•Lost/delayed/damaged baggage service•Addressing service complaints

Sustain-ability Activi-

ties

•Better accessibility and connectivity for people/logistics•Promotion of exchanges between

countries and of the regional economy, and job creation•Product design considering

environmental impacts (ex. Sharklet)•Global promotion of Korean

in-flight meals•Contracts with local farms

for fresh food supply

•Procurement of next generation aircraft and engines

•Employee safety and human rights protection•Balance between work and life•Employee training • Fair performance evaluation

•Compliance with fair trade•Cause-related marketing•Customer-engaged programs

•Internet mobile service system implementation•Service for passengers with special

needs and Family Care Service•Airfare discount for patriots and

veterans •Customer’s personal data protection•Biodiversity protection

•Strengthened product responsibility and safety•In-flight disturbance management•In-flight first aid•Response to climate change issues•Environmental impact reduction

•Infectious disease control •Customer rights protection•Customer service improvement •Corporate social responsibility

activities

Input •R&D expenses: KRW 110,324 million (0.96% of sales)

•Aircraft investment: KRW 1,366.9 billion •Average fleet age: 9.2 years

•Training hours per employee: 89 •Employees who received scholarships

for graduate schools: 140

•Ethics management training: 72,996 employees

• Jet fuel consumption 4,174,377 ton•Energy consumption 2,054,635 GJ

•Employee volunteer hours: 1.9•Social contribution expenses:

KRW 9,227 million

Service development Planning & Scheduling Flight operation Post-flight operation

11

UN’s Sustainable Development Goals (SDGs)

Korean Air’s efforts for SDGs

As the United Nations announced Sustainable Development Goals (SDGs) following Millennium Development Goals

(MDGs) that the global community should achieve, Korean Airline has developed and implemented solutions to achieve

SDGs* thereby discovering new opportunities for a sustainable growth.

*SDGs are global agenda spearheaded by the UN from this year to 2030, consisting of 17 goals, such as climate action, economic growth, job creation, gender equality and women's empowerment, and 169 targets.

Goal 3. Ensure healthy lives and promote wellbeing for all at all ages

Goal 4. Ensure inclusive and quality education for all and promote lifelong learning

Goal 5. Achieve gender equality and empower all women and girls

Goal 7. Ensure access to affordable, reliable, sustainable, and modern energy for all

Goal 8. Promote inclusive and sustainable economic growth, employment and decent work for all

•Supporting speedy cargo transportation such as vaccines and medicines: transportation for organ transplants

•Making efforts to prevent the spread of infectious disease

• Training air logistics specialists in Jungseok College, Korea’s first tech school run by a private company

• Working on the‘愛心 (Caring Mind)’ project in China to build and donate libraries to underdeveloped provinces

•Promoting gender equality in employment and promotion

•operating a maternity protection system

• Launching a pink ribbon campaign to fight against breast cancer

•Responding to ‘CoRSIA (Carbon offsetting and Reduction Scheme for International Aviation)’ for carbon-neutral growth after 2020

•Reviewing the introduction of sustainable alternative fuels (biofuel)

• Implementing activities to encourage sustainable tourism by promoting local culture and products

•Contributing to economic growth and value creation through tourism, employment, and cargo transportation

Goal 11. Make cities inclusive, safe, resilient and sustainable

Goal 12. Ensure sustainable consumption and production pattern

Goal 13. Take urgent action to combat climate change and its impacts

Goal 15. Sustainably manage forests, combat desertification, halt and reverse land degradation, halt biodiversity loss

•Conducting Habitat activities

•Implementing activities to protect the world’s cultural and natural heritage

•Conducting activities to reduce air pollution, waste and noise nearby the airport

•Transporting relief items to areas hit by natural disasters

• Improving traffic safety for passengers with special needs (women, children, people with disabilities, and the elderly)

•Recycling resources related to in-flight service

•Applying eco-design to in-flight service items

•Adopting advanced eco-friendly aircraft and making aircraft lightweight

•Conducting activities to respond to climate change through fuel management

•offsetting GHG emissions by purchasing permits

• Designing and manufacturing aircraft structures with improved fuel efficiency such as Sharklets

• Implementing standards to prevent illegal transportation of wildlife

•Banning the transportation of shark fins

•Afforestation in Baganuur, Mongolia and in Kubuqi, China

12

Materiality Assessment Process

Reporting issue selection process

2017 Material issues

2016issues

2017issues

Management

Employees

Customers and Safety

Environment

Local communities

*GRI and ISo 26000 applied

Ensuring operational safety

1 Enhancing safety checks and security

2Developing and offering customer-oriented service

4

Managing energy use and GHG emissions

5

Conducting social contribution activities reflecting industry characteristics

6

Adopting eco-friendly aircraft and equipment

9

Creating a flexible and family-friendly corporate culture

7

Enhancing brand reputation and corporate image

3

Protecting customers’ personal data and tightening information security

10

Further involvement of employees and stakeholders in social contribution activities

8

Leve

l of s

take

hold

er in

tere

st

•Review of internal data including company vision and strategy

•Media research and analysis

•Identifying industrial issues

•Benchmarking of best practices on sustainable management

•Value chain activities

• Impact on stakeholders and sustainability

•Impact on business

•Validation of selected material issues

•Level of impact

•Potential impact

•Level of stakeholder interest

Level of impact on business

STEP 1. A pool of selected issues STEP 2. Materiality assessment STEP 3. Assessment validation

Stakeholder interviews Survey of stakeholders (Mar.22 - Apr. 5, 2017; 307 participants) Third-party assurance

Step 1 Level of interest

Step 2 Level of impor-tance

13

Stakeholder Engagement

Stakeholder Groups

Subsidiaries

SuppliersLabor unions

Central government

Local governments

Customers

The disadvantaged

Non-profit organizations

Local communities

Temporary employees

and Interns

Research institutes

(business-related)

Media

Legally,

fi nancially or operationally responsible for Korean Air

Aff ecting the perform

ance of Korean Air

Aff ected by the business

operatio

n of

Kor

ean

Air

Stakeholder Communication Channel

Customers

Websites, blogs, Twitter

SNS channels such as twitter, VoC,

a 24-hour chat service,

1588-2001, and Family Care Service

Employees

Communication Plaza, Labor-Management Council,

Grievances Resolution Channels, Mentoring Program,

Intranet ‘Hanway’, and occupational Safety and

Health Committee

Suppliers

Grievances handling and suggestions

(Supplier management system),

training, meetings, complaints and feedbacks

Local

communitiesSponsorship, and social contribution activities

Central

government

Public hearings, association activities, and meetings

with related agencies

ShareholdersGeneral shareholder’s meeting, IR sessions, and

public announcement

Labor unions Labor-Management Council

Employees

Shareholders

14


S t a k e h o l d e r I n t e r v i e w s

“ By setting operational safety

as our first priority, we will

enhance both aviation safety

and passenger convenience”

Korean Air, Corporate Safety, Security

and Compliance, Senior Vice President

Michel Gaudreau

As someone in charge of aviation safety and security at Korean Air, I believe it is very important to establish a system

for safety management and spread a culture of preventive safety. Korean Air’s Safety Management System (SMS),

which I am confident is worthy of worldwide recognition, enables us to proactively identify and control risk factors in

a systematic and organized manner rather than responding to incidents simply as they occur.

In recent years, the importance of aviation security has become more emphasized as incidents, such as in-flight

disturbance and terror threats, are increasing. Korean Air not only has cooperated closely with the MoLIT and related

organizations to respond proactively against any security threats, but has also

strengthen cabin security training and introduced/loaded new

cabin security equipment on board.

Moreover, Korean Air has been operating the Accident Free

Campaign since 1995 to promote safety awareness and

establish preventative safety culture. Job Hazard Analysis

has also been implemented to further involve employees

in the assessment of potential risks on the job.

Going forward, Korean Air will continue to work hard to

heighten safety and security awareness and

ensure the highest level of operational

safety.

15

“ As a leading global airline

in the aviation industry,

I hope Korean Air will take

the initiative in minimizing

its environmental impact and

pursuing eco-friendly business

practices.”

Kim Dae-geun,

Lead Auditor at DNV GL

Environmental issues such as climate change are today considered to be major issues that need to

be addressed not just at the national level but internationally. They also serve as benchmarks for the

sustainability efforts of companies. In this regard, as the largest airline in Korea, Korean Air needs to

consider the following.

Firstly, going beyond implementing eco-friendly business practices on its own, the company

should cooperate with its business partners, including suppliers to create synergy in environmental

management. If Korean Air and its partners work together to conserve energy in the aviation sector,

they can come up with a variety of measures to deal with climate change issues.

Secondly, considering the growing importance of sustainability, Korean Air should be more

proactive in sustainable procurement. As the company at the top of the aviation industry supply,

its purchasing practices significantly influence others down the chain. Eco-friendliness should be

considered in purchasing so as to gradually increase the ratio of green products in procurement.

Lastly, I hope Korean Air will take the lead as friendly green company by actively

participating in initiatives for GHG emissions reduction and energy conservation,

which will greatly contribute to realizing the company vision of creating upgraded

lifestyles through the achievement of a healthy dynamic between aviation and the

environment.


16

“ Habitat for Humanity Korea

looks forward to Korean Air’s

continued support for our

efforts for low-income families

to gain hope as well as housing,

helping them stand on their

feet as healthy members of the

local community.”

Kim Hee-yoon,

Team leader of Habitat

for Humanity Korea

Habitat for Humanity Korea is a non-profit housing organization that has helped low-income families

in need of housing through home construction, rehabilitation and repair. As a donor to Habitat

since 2001, Korean Air has been supplying support to house-building projects every year. Due to the

support, fifteen families have been provided with a home. In addition to offering financial support,

Korean Air employees have volunteered for construction work, giving families (Home Partners) hope as

well as houses and contributing to the local community. What Korean Air has done for those families is

right line with its goal of continuing social contribution activities through Global CSR projects under its

mission of Service Excellence.

Having a decent place to live positively affects the lives of all family members. Children become

heathier, show improved personal adjustment, and do better at school. Conditions for family income

and safety are enhanced. Habitat is working in many countries around the world to improve the

housing environment along with providing training on hygiene, drinking water and awareness

raising. If Korean Air seeks ways to involve its customers as well as employees in Habitat activities,

it will help even more families to live in a better environment. We look forward to Korean Air’s

continued support for laying a foundation to help low-income families to break the vicious circle

of poverty and stand on their feet.


17

The reason I use Korean Air is that it offers various routes and great schedule that make

transfer faster and more convenient, and it provides tickets with a wide range of price

options. In addition, its high-end and customized services that meet customer's needs and

help passengers to relieve the fatigue and tension from frequent business trips and other

types of travel. In particular, the introduction of "Prestige Suites" that allow passengers

to fly in complete privacy, and the wide variety of services and resting space to enhance

convenience and allow passengers to have special in-flight experiences.

At a time when aviation safety and in-flight security have become social issues, the news

on Korean Air's efforts to ensure safety have really impressed me. According to the news, its

cabin safety instructors have completed the same safety training provided to the Presidential

Security office, the first private company to do this. I believe training in cabin safety

expertise is the most fundamental activity to protect the safety of passengers as well as of

the cabin crew themselves. Customer service and in-flight safety are the key to the success

of air transportation business. I look forward to Korean Air’s continued efforts to provide

high-end services while keeping their priority on safety.

“ I expect Korean Air to continue

to provide excellent service while

maintaining a high level of safety.”

Nam Jeong-min,

Korean Air customer


18Photo by No Ui-za in Val d'orcia, Italy – Among selections during the 23rd Annual Korean Air Travel Photo Contest

KAL’s Issue Report

19

23

31

35

BOARDING PASS

Italy is among the countries with the world's richest

cultural heritage, as represented by influential

Renaissance figures such as Leonardo da Vinci and

Michelangelo. Val d'orcia, a region of Tuscany with a

medieval agricultural landscape, was added to the

UNESCo list of World Heritage Sites in 2004.2017 Korean Air sustainability report

Italy

19

Changes in the Business Environment and Korean Air at Present

In recent years, aviation safety has become increasingly important as incidents such as aircraft en-

gine fires and in-flight disturbance have emerged as social issues in Korea. Accidents and terrorist

threats that have been taking place in many countries have lead the International Civil Aviation

organization (ICAo) to approve recommendations for strengthening aircraft safety regulations.

Meanwhile, the Korean government has been conducting comprehensive safety audits for airlines

as part of efforts to ensure operational safety and security in the aviation industry.

Stakeholder Views

According to the stakeholder materiality assessment in 2017, operational safety has been identified

as the single most important issue for sustainability. For Korean Air, safety is without hesitation the

top priority. Therefore, we are continuing to upgrade our safety management, building upon our

accomplishment of no fatal accidents over the last 18 years.

ISSuE 01Strengthening aviation safety and securityWhat is Korean Air's commitment to flight safety and information security?

WHERE

WE STAND

HOW WE

LISTEN

WHAT

WE DO

Stakeholder Views Enhancing safety check-ups and security

Category

Social and product

responsibility

Relevance to GRI Customer health and

safety

Reporting Issues•Ensuring operational safety

•Reinforcing safety check-ups and security

Where the impact comes from

Where the issue impacts

Internal External Cost Profit Risk

Indicator 2014 2015 2016 2017 Goals

ongoing

efforts to

ensure

operational

safety

Achieved

15-year

fatal-

accident-

free flight

operations

Achieved

16-year

fatal-

accident-

free flight

operations

Achieved

17-year

fatal-

accident-

free flight

operations

Improving company-wide safety

management with the extended

scope of the Safety Management

System covering both headquarters

and regional offices, and

strengthening operational safety

through on-site training

20

Ensuring operational Safety

Extending the scope of Safety Management System (SMS)Korean Air’s safety management system takes on a three-phase approach including ex-post

response, ex-ante prevention and prediction. The ex-post response involves an investigation

of events that have already occurred and an analysis of the causes; the ex-ante prevention fo-

cuses on minimizing the impact of risks by identifying safety risks through safety reports and

safety examinations; and prediction is based on an analysis of flight data and regular flight

monitoring data to keep a close watch on safety. This multi-layered safety management sys-

tem is a critical component of our effort in safety management.

The Corporate Safety, Security & Compliance is under the direct control of the president.

The director in charge of safety and security keeps a direct hotline to the president so as to

ensure that the reporting channel remains independent from the organization and that the

top management can be fully informed of all safety and security issues. In May of 2015, a SMS

Group dedicated to safety management was newly set up within the Corporate Safety, Secu-

rity & Compliance in order to reinforce the practice of SMS programs. The SMS Group evalu-

ates safety risk factors and monitors the performance results of risk countermeasures, keeps

abreast of the safety report trends, analyzes safety data and upgrades the SMS IT Systems. It

also arranges and organizes company-wide online SMS training programs and workshops

for SMS executives, teams and staff in support of employee safety management practices at

their respective duty levels according to their roles and responsibilities.

In 2017, the scope of the Safety Management System (SMS), which previously covered Cor-

porate Safety, Security & Compliance, and seven other business divisions, was expanded ex-

tended to include regional offices at home and abroad. By strengthening on-site safety man-

agement and establishing a reporting channel between headquarters and regional offices,

it is expected that safety issues can be properly managed at the company level and safety

management at Korean Air will be further enhanced.

Material Issue Report

Cabin Cargo

AerospacePassenger

Corporate Safety, Security & Compliance

(Company-wide SMS)

The scope of SMS has extended

to add regional offices at home and abroad

operations Control

Flight operations

Mainte-nance &

Engineering

Mainte-nance &

Engineering

Cabin

Domestic regional offices

overseas regional offices

operations Control

Flight operations

Cargo

Passenger

Corporate Safety, Security & Compliance

(Company-wide SMS)

21

IOSA-Certified AirlinerKorean Air was the nation’s first airliner to be certified by the IATA

operational Safety Audit (IoSA) in January of 2005, qualifying more

than 900 safety criteria of the international safety audit program

developed by the IATA. Since then, Korean Air has been re-audit-

ed and certified every other year. In the sixth audit for certifica-

tion conducted in october 2016, all of the safety criteria were met

without any issues. The current certification will be effective until

January 21, 2019.

ISAGO ProgramKorean Air monitors its ground operation partners under the IATA

Safety Audit for Ground operations (ISAGo) as a member of the

program since April of 2009. In addition, as a member of the ISAGo

Pool Advisory Group, we share information and collaborate with

peers and related organizations to standardize international safe-

ty practices and to promote the safety and operational quality of

ground handlers around the world. According to the IATA’s annual

Audit schedule, Korean Air is scheduled to conduct seven audits

in 2017.

Safety committees and councils

MSSM : Monthly Safety & Security Meeting

•Irregular flight data analysis and recurrence prevention

•Close cooperation between related teams on pending safety issues

CSC : Central Safety Committee

•Review and approval of

comprehensive safety plans

EAC : Executive Action Council

•Revision and approval of safety

regulations/procedures

•Review and approval of safety-related projects

Safety & Security

Flight operations

Maintenance & Engineering

Cabin Passenger Cargooperations

Control Regional

Headquarters

Enhancing Safety Checks and Security

Top Management (Held annually)

Heads of Related

Divisions (Held semi-annually)

Heads of Related Teams (Held monthly)


http://www.iata.org/whatwedo/safety/audit/iosa/Pages/operator.aspx?c=KAL

22

DOD safety certificationSince 2001, Korean Air’s operational safety has been recognized by

the U.S. Department of Defense (DoD), also the head of the Air-

lift Transportation Program. This safety initiative uses evaluation

results, which are acquired every six months, to assess the safety

of private air carriers in order to determine whether they are safe

enough for its employees to fly on business trips along with on-

site inspections conducted every two years. Korean Air has met all

the safety standards under the Airlift Transportation Program and

earned its latest certification following the 2017 on-site inspection.

Company-wide Safety & Security Training Course for ManagersIn order to ensure operational safety, the Company-wide Safety

& Security Training Course for Managers program was conducted

from September 2016 to April 2017 for with 543 executives and

business division managers at home and abroad. The four-day

course consists of two-day training on regulations, principles and

procedures, and case studies, and two-day on-the-job training in

passenger, cargo, maintenance, and operations control. The course

aims to heighten awareness of the responsibility of safety and se-

curity thereby further strengthening competitiveness in terms of

safety.

Response to in-flight disturbancesKorean Air has carefully devise a range of countermeasures to

in-flight disturbances that allow flight crews to promptly and

effectively respond to unruly or violent passengers, minimize in-

convenience to other passengers, and maximize safety on flights.

As aviation security laws and airline operational guidelines for se-

curity personnel in airplanes have recently been strengthened, a

zero-tolerance policy will be applied to any acts that might jeopar-

dize safety on airplanes, and stricter punishments will be imposed.

Korean Air has been providing cabin crews with security training

and education, including special training in partnership with the

Presidential Security office, and has introduced new security

equipment education that will allow them to promptly manage

in-flight disturbances.

In the second half of 2017, greater focus is placed on practical

matters during annual cabin safety training. We will do our utmost

through training and education for the crew to keep all our pas-

sengers safe.


23

ISSuE 02Responding to new climate regimesWhat efforts is Korean Air making to address climate change?

Stakeholder ViewsManaging energy use and GHG emissions , Adopt-

ing eco-friendly aircraft and equipment

Category

Environment

Relevance to GRI Energy, emissions

Reporting Issues •Introducing cutting-edge aircrafts with improved

fuel efficiency •Reducing GHG emissions through lightweight

aircraft and eco-friendly flight operations •Manufacturing eco-friendly aircraft structures

and reviewing the feasibility on jet bio fuel

Stakeholder Views

our stakeholders believe GHG emissions by the international aviation sector, which stand at 2% of

the worldwide total, are expected to sharply increase, and it is important for airlines to use energy

efficiently and be held responsible for managing GHG emissions. Korean Air will report on strategies

and activities for reducing GHG emissions as material issues and will continue to manage them

appropriately

WHERE

WE STAND

HOW WE

LISTEN

WHAT

WE DO


Fuel efficiency for international routes

(ℓ/100RTK)*35.41 34.4 35.24 34.65

GHG emission reduction in the

aviation sector(tCo2)431,874 445,790 413,613 406,223

*Fuel efficiency = Fuel consumption (liter) / Transportation (100RTK)*RTK(Revenue Ton Kilometer)means a single ton of passengers/cargo for one kilometer. It is used as a unit for sales of an airliner.

Changes in the Business Environment and Korean Air at Present

Governments, industries, and the private sector as a whole are all striving to address global environ-

mental issues. The Paris Agreement within the United Nations Framework Convention on Climate

Change (UNFCCC) was adopted in December 2015 and represents a major step forward the efforts

by the global community to overcome these challenges. Higher income level and a more global-

ized world have led to a rapid increase in air travel and cargo transportation. For the past years, the

ICAo has devising approaches to climate change issues that relate to international aviation. As a

result, CoRSIA (Carbon offsetting and Reduction Scheme for International Aviation), the first global

framework covering an entire industrial sector, was adopted by the ICAo Assembly.




24

Fuel efficiency in 2016 recorded 1.6%p below the target

Fuel Efficiency Note

Base Years 36.49(ℓ/100RTK) Base years: 2011-2013

Target 35.76(ℓ/100RTK) 2.0% improvement from the average fuel efficiency in the base years

Actual 35.24(ℓ/100RTK) 3.6% improvement compared to the average fuel efficiency in the base years

37.00

34.00

35.50

35.00

36.50

36.00

34.50

2011

36.40

2012

36.75

2013

36.34

2014

35.41

2015

34.40

2016

35.24

Base-year Average 36.49ℓ/100RTK

Target 35.76ℓ/100RTK

Target improvement

rate

Actual improvement

rate

Target

2.0%↑Actual

3.6%↑

Year

Fuel efficiency


25

Introducing Cutting-edge Aircrafts with Greater Fuel Efficiency By contracting for 100 new aircraft, B737MAX-8 and A321NEO models will be introduced from 2019 through 2025.Korean Air is continuing its fleet modernization by adopting

next-generation aircraft such as Boeing B747-8i and B787-9 models

to improve flight operation, safety and fuel efficiency. In particular,

the B787-9, introduced in February and April 2017, provides a new

level of comfort. Since pressure and humidity in the B787-9 can be

set higher than in existing aircrafts, passengers can feel more com-

fortable during flight. The B787-9, also known as the Boeing 787-9

Dreamliner is equipped with the state-of-the-art GEnx-1B engine

and is made from 50% carbon composite materials and 20% of alu-

minum alloy, making it more lightweight and durable. As a result,

its fuel efficiency is 20% higher and carbon emissions are 20% low-

er than comparable models.Aircraft Investment (KRW 100 million)

2014

2015

2016

13,340

32,428

13,669

2014 2015 2016

Passenger 9.7 9.5 9.7

Cargo 8.7 9.1 7.4

Average Age 9.6 9.4 9.2

Average Age of Aircraft(years)

2017 Aircraft adopted

•Three B747-8i (Jan., May, and June)

•Two B777-300ER (May and June)

•one B747-8F (Dec.)

•Six B777F (June, Aug., Sept., oct., and Dec.)

Aircrafts retired

•Five B747-400 sold (Apr., June July, and Dec.)

•one B777-200 leased to JINAIR (July)

•Four B777-200 sold (Aug., oct., Nov., and Dec.)

*Two B737-800 leased to JINAIR right after being introduced (Mar. and June)


26

Dream flights offering comfort and pleasant experience

|SPECIAL PAGE | Dream Flight with Korean Air B787-9

DREAM SPACE, SEATWider passenger space, Comfortable seating

DREAM VIEW, WINDOWlarger passenger windows, window with adjustable transparency

DREAM LIGHTLED lighting to produce various atmosphere

DREAM CABIN Improved cabin pressure, Comfortable cabin humidity

Pleasant cabin environment Dizziness, headache, and dryness of the eyes are reduced.

HEPA filterBacteria, viruses and mold are removed.

Ozone reduction

outside air

Cabin air

Gas filterodors, polluted gas substances, etc. are removed.

DREAM CABIN Improved cabin pressure, Comfortable cabin humidity

The B787-9 has a separate compressor (Cabin Air Compressor)

that converts the outside air to high temperature / high

pressure, then cools it and supplies it to the cabin. In

addition, the humidification system installed in the upper

part of the cabin increases the humidity of the air supplied

inside the cabin (about 1.5 times compared with other

airplane) to create a more comfortable cabin environment.


27


5. Dream Flight - Smoother Ride TechnologyIn comparison to the B777, the B787-9 is equipped with two additional system

sensors under the cockpit, which allows the aircraft to be adjusted up and

down, enables detection when turbulence is encountered, and improves flight

stablity by controlling elevators and its rudder.

Droopable spoilers

Aircraft efficiency is

increased through

improved airflow on

the wing during

takeoff and landing.

Variable Camber

Improves aircraft efficiency

by adjusting posture to

optimize the center of

gravity during cruising.

Raked Wing Tip

Improves aircraft

efficiency by

reducing the vortex

from wing tip.

Ailerons

Multifunctional Ailerons

optimize wing efficiency

during takeoff, landing

and cruising.

Flap Fairing

Smaller Flap Fairing reduces drag.Eco-friendly flight

through reduced

fuel consumption.Increases customer

convenience

by reducing the

amount of engine

noise that enters

the cabin.

Minimizes carbon footprint

by reducing the emission of

harmful gases.

Dream technology of benefiting the environment and people

|SPECIAL PAGE | Dream Flight with Korean Air B787-9

1. Dream Material - Carbon Fiber FuselageUnlike conventional airplanes, which are made by assembling various pieces,

the single-piece, composite barrel technology that makes a carbon fiber

fuselage from an oven called an <autoclave> enables a comfortable cabin

pressure to be maintained, while also allowing for larger windows. This can

lead to innovative improvements in the aircraft's structural performance.

2. Dream Technology - State-of-the-art Digital Flight DeckThe use of state-of-the-art high-speed digital wireless communication

technology improves the safety of navigation by allowing all aircraft operations

to be monitored from the ground during flight. As well, it incorporates the

latest digital technology that enables pilots to check all of the manuals for flight

operations and maintenance on the computer screen inside the cockpit.

3. Dream Engine - Eco-friendly EngineThe B787-9 engine is an eco-friendly engine that has significantly reduced

emissions of harmful gases such as carbon dioxide compared to other engines.

In addition, it reduces the noise of the engine entering the cabin by 30%,

allowing passengers to enjoy a more comfortable flight.

4. Dream Wing - Advanced WingThe efficiency of the aircraft was improved by applying the optimized wing

shape to the flight environment. As a result of this increase in aircraft efficiency,

fuel consumption has been reduced to enable eco-friendly flights, and Korean

Air has participated directly in the production of Raked Wing Tip at the wing end.

28

Reducing GHG emissions through Lightweight Aircraft and Eco-friendly Flight operations

Fuel Management Process Korean Air’s fuel management process is based on ten years of ded-

icated infrastructure that includes the management of fuel and en-

hancement of operational flight efficiency through eco-flight pro-

cedures and upgrades to fuel-loading policy. The process is being

implemented through cooperation among business divisions in

flight operations, maintenance, flight planning and transportation.

2014 2015 2016

Eco-flight 141,168 143,019 149,606

Performance improvement 97,793 93,346 56,628

Flightplanning 168,039 181,159 179,332

Weight management 24,873 28,266 28,047

Total 431,873 445,790 413,613

GHG emissions reduction performance results(tCo2)

•Using economical

ground equipment while parking

•Engine Water washing

• Enhancing performance with

maintenance on engine fan blades

• Raising fuel efficiency by installing

winglets on B737s

•Loading adequate amount

of potable water

•Reducing pay load variance

•Using lightweight containers

•Balancing out aircraft center of

gravity

Weight

Performance

Operations

Flight plan

FuelManagement


Maintenance and fuel management tasks

Ground handling

•Using designated equipment •Carrying optimal amount of

potable water•Managing over-fueling

Maintenance process improvement

•Improving static leak test procedures for engines•Changing a fan blade trim

method

Aircraft/Engine performance enhancement

•Engine Water Washing•Installing winglets on B737s •Running a maintenance program

on aircraft drag reduction

Weight management

•Removing or adjusting FAK (fly-away-kits)•Removing unused parts and

maintenance manual

•Refraining from unnecessary reverse

thrust when landing

•one engine-powered Taxi In/out

•operating a flight at optimal speeds

considering fuel/operation costs

•Ensuring the optimal use of flaps

during takeoff/landing

•Developing the nearest alternate

airports and shortcut routes

•Amending fuel loading regulations

•Loading fuel based on a statistical

analysis of fuel consumption patterns

• Loading fuel considering oil prices at

departure and destination airports

29


Engine Cycles

EGT M

argin

1000 Cycle-Wash Deterioration Curve

Un-Washed Deterioration Curve

500 Cycle-Wash Deterioraion Curve

500 Cycle-Wash Cumulative-Benefit

1000 Cycle-Wash Cumulative Benefit

Engine water washing and engine performance

Maintenance program on aircraft drag reductionWe have implemented various programs to improve fuel efficiency by eliminating factors

aggravating aerodynamics, and reducing the drag that opposes an aircraft's forward motion.

88-inch pallet uLD locking devices removed on Korean Air Cargo Boeing 777sFor cargo aircraft, ULDs (unit load device) are used to bundle large quantities of cargo in to

a single unit for loading. They come in 96-inch and 88-inch versions, but 96-inch pallet ULDs

are mainly used in Korean Air for their greater capacity. Installed locking devices for 88-inch

pallet ULDs were removed since they were not frequently used. As a result, 350,000 pounds

(154.2 tons) of fuel was saved in 2016.

Engine water washingEngine water washing is continuously conducted for Korean Air

aircraft. The method is effective at improving fuel efficiency and

reducing GHG emissions as it increases the performance of the

compressor and improves air flow. Fan blades (engine fan blades)

are cleaned as well using custom nozzles. In 2016, engine water

washing was conducted a total of 429 times, saving 13.05 million

pounds of fuel (5,918 tons) annually, and 640 are planned for 2017.Two dents on a door

Drag due to dents

on the fuselage surface

A gap on the control surface

Drag created by a gap

on the control surface

Repair of fuselage surface area

A flush repair is recommended

that smoothes the surface to

minimize drag

Contaminated fuselage surface

Drag caused by pollutants

on the fuselage surface

Crushed Seals Deformation of Seals

attached to the fuselage

led to drag

Rough paintingDrag occurring on a

roughly painted surface

30

Sharklets diminish wingtip

vortices

with reduced air

resistance.

Conventional wingtipsgenerate wingtip

vortices

with high air

resistance

Eco-friendly Aircraft Structures and Jet Bio-Fuel

Designing and manufacturing eco-friendly aircraft structures Korean Air leverages its original technology to perform the designing, manufacturing and

certification of Sharklets, elements of the wing structure used on A330NEo (New Engine

option) for the Airbus, in addition to its supply of Sharklets for the A320. Made of high-tech

composite materials, a Sharklet is a winglet measuring 2m in width and 4m in length that

is installed on the tip of the main wings of an aircraft while aiding in air resistance at the tip

of the wings, giving way to a rise in fuel efficiency by 4% and the simultaneous reduction of

Co2 emissions. Korean Air is expected to deliver more than 600 A330 NEo Sharklet wingtips

and will continue to do its best to design, manufacture, and deliver eco-friendly fuselage

and main components to promote aircraft fuel efficiency worldwide.

Reviewing the feasibility on jet bio-fuelRecently, the development of jet bio-fuel as sustainable energy has been promoted

throughout the aviation industry. The technical feasibility of jet bio-fuel has been proven

by several air carriers through test flights, and numerous studies on its economic feasibility

and sustainability are being conducted. Multiple airlines, including KLM and Lufthansa, are

currently operating regular flights using bio-fuels on select routes. Since Korean researchers

succeeded in developing a prototype jet bio-fuel for the aviation sector in 2013, R&D and

production efforts have continued in Korea. The government is also reviewing the feasibility

of introducing jet bio-fuels in domestic aviation sector and considering test flights. In order

to achieve the CNG 2020 (carbon-neutral growth after 2020) set by the ICAo, alternative

fuels, including bio jet-fuel need to be utilized. However, as the cost of this fuel is approxi-

mately three time higher than that of conventional alternatives, it is not yet feasible for the

market. Keenly aware of the needs for introducing bio jet-fuel over the long term, Korean Air

is seeking cooperation with the government and research institutes to proactively address

sustainable energy issues.

Model Structure Property

B737MAX Winglets 1.5% improved fuel efficiency

B747-8Raked Wing Tip

Significantly enhanced aerodynamic performance compared to conventional wingtips (Improving fuel efficiency by 6% by increasing wing area)

A320Sharklet 4% improved fuel efficiency

A330NEo

Manufactured eco-friendly aircraft structures

A330 Sharklets•Winglets measuring 2m in width and 4m in length

•Made of lightweight, high-tech composite materials

• Sharklets help to reduce wingtip vortices that occur

when air on the upper wing surface has lower pressure

relative to the bottom.

•4% improvement in fuel efficiency.


31

ISSuE 03Providing customer-oriented serviceHow does Korean Air provide services to promote its customers’ wellbeing?

Stakeholder ViewsDeveloping and offering customer-oriented

service, Promoting responsible advertising and

marketing, Protecting customers’ personal data

and tightening information security

Category

Social and

product

responsibility

Relevance to GRIProduct and service labelling,

Marketing communications,

Customer data protection

Reporting Issues•Developing and offering customer-oriented service•Protecting customers’ personal data and

tightening information security




Changes in the Business Environment and Korean Air Today

Airline services are rapidly evolving to meet the needs of customers by offering a wide range of ameni-

ties, such as in-flight meal menus created by master chefs, more comfortable seats and hotel-like interi-

ors, and links to video Spanish lessons for passengers traveling to Mexico. The level of customer experi-

ence is rising higher than ever due to cultural awareness, economic growth and technological advances.

People have also come to expect the convenience of ‘one-stop’ service on a seamless digital platform.

In addition, with the spread of new devices and media, has come a demand for better web accessibility

to the visually impaired and the elderly. Also, improved flight services for those who with special travel

needs are increasingly required. In response, Korean Air is working hard to pinpoint what customers

want, communicate clearly with them, and ensure they receive services tailored precisely to their needs.

Stakeholder Views

The stakeholder materiality assessment indicates that travelers with special needs, including the visual-

ly- and hearing-impaired, the elderly, pregnant women, and children still experience difficulties access-

ing flight services and stakeholders clearly recognize the importance of improving flight services for

those who with unique travel requirements. In addition, there is a need to quickly respond to customer

needs by using big data and diverse communication channels and to enhance interoperability with

mobile devices to raise customer convenience and satisfaction. Developing and offering customer-ori-

ented service was selected as one of the material issues for 2017 and will be thoroughly reflected in

our business activities. We will continue to improve in this regard.

WHERE

WE STAND

WHAT

WE DO

HOW WE

LISTEN


Customer data leakage (cases) 0 0 0 0

Information security training (persons) 15,941 30,764 30,465 -

Voice of Customer (cases) 56,126 36,789 41,719 -

Global Customer Satisfaction Index (GCSI) 1st rank 1st rank 1st rank 1st rank

Stakeholder ViewsManaging energy use and GHG emissions , Adopt-

ing eco-friendly aircraft and equipment

Category

Environment

Relevance to GRI Energy, emissions

Reporting Issues •Introducing cutting-edge aircrafts with improved

fuel efficiency •Reducing GHG emissions through lightweight

aircraft and eco-friendly flight operations •Manufacturing eco-friendly aircraft structures

and reviewing the feasibility on jet bio fuel

32

Material Issue Report Developing and offering Customer-oriented Service

Airport service

In-flight services

Pre-departure services

Hover here to see details.

https://kr.koreanair.com/content/koreanair/korea/ko/traveling/classes-of-service.html

33

Service improved by VOCs one of our key management policies is reflecting customer feed-

backs in customer services. ‘Voice of the Customer (VoC)’ serves as

an important tool to monitor the ‘moments of truth’.

VOC Management(cases)

2014 2015 2016

Compliments 7,359 8,132 11,489

Complaints 4,158 4,098 4,785

Suggestions 568 477 522

Inquiries 44,041 24,082 24,921

Total 56,126 36,789 41,717


Service forum

*A category of others in the previous year's report is excluded as it is considered insignificant.

Feedback

Service forum (intranet bulletin

board)

Reply

Posting complaints and compliments

Customer Korean Air Policy and system improvements

Customer needs analysis

VoC system (automatically sorting out customer

complaints and generating responses)

Company-wide awareness raising on customer compliments and complaints •�Understanding front-end customer services

and sharing information •Feedback and service Improvements

Transportation for organ transplants increasing on domestic flightsPreviously, only

one human organ could be transported per domestic flight. However, after reviewing cus-

tomer feedback about difficulties faced with receiving needed organs at local airports with

only a small number of flights, such as Sacheon airport, related regulations were revised.

As of November 29, 2016, the allowed number of human organs transported per domestic

flight has been increased to two.

Information on bibimbap for foreign passengersMenu descriptions of bibimbap have

been improved, and an explanation on how to eat it is provided passengers who might be

unfamiliar with Korean cuisine.

Day of week specified on E-ticketBased on a customer suggestion to add the day of

the week to the departure and arrival information on the Itinerary Ticket Receipt (ITR), the

day has been specified on ITRs issued by Korean Air and by travel agencies using ToPAS as

of June 28, 2016.

CBBG(CabinBaggage)CBBG refers to bulky of fragile items that must occupies a sepa-

rate seat in the aircraft. Unpaid baggage was not accepted as CBBG under IATA regulations,

but after reviewing customer suggestions we have been accepting unpaid baggage as of

September 19, 2016.

34

Information security training(Information security training)

Year 2014 2015 2016

Training•First half : our company’s

information security•Second half: Personal data protection

•First half: Understanding of personal data and how to protect PCs•Second half: our company’s data protection

First half

Domestic 7,402 17,116 17,176

First half 656 3,002 2,962

Second half

Domestic 7,284 7,727 7,470

First half 599 2,919 2,857

2014 2015 2016

Leakage of customer information 0 0 0

Officially confirmed leakage of customers’ personal data(cases)

Protecting Customers’ Personal Data and Tightening Information SecurityMaterial Issue Report

Integrated information security managementWith growing social and policy requirements to ensure data securi-

ty and privacy protection, Korean Air has established a department

responsible for information security and has conducted preven-

tion-focused activities to combat cyber terrorism and leakage of

personal information. After being reorganized as an independent

entity to strengthen information and security competency in octo-

ber 2014, the department has come under the direct control of the

president. The department is currently monitoring employees’ com-

pliance with information security and privacy protection procedures.

once issues are identified, immediate corrective action is taken to

protect the intellectual and physical property of the company. At the

same time, a lot of efforts are being made to prevent security inci-

dents by proactively managing and responding to related issues.

Customer data protection To protect customers’ personal information, penetration tests are reg-

ularly conducted and customer data collected from SKYPASS mem-

bership, the Korean Air website, customers call centers, and offices at

airports and in cities are being securely managed in accordance with

related laws, including the Personal Data Protection Act and the Act

on the Promotion of Information and Communications Network Utili-

zation and Information Protection. Furthermore, technical, administra-

tive, and physical safeguards are firmly in place to ensure the highest

possible level of security.

Information Security Management System (ISMS)Korean Air, as a member company of the Korea online Privacy Association, a leading private

organization dedicated to personal information protection, is actively conducting activities

on personal data protection. Korean Air became the first company in the aviation industry

certified for the Information Security Management System (ISMS) by the Korea Internet &

Security Agency (KISA) in 2005, and has been accredited since then.

Information security training All domestic and overseas employees handling customer information are required to un-

dergo training on information security and personal data protection twice per year with

some programs available year-round. Information security training covers the full process

from the collection of customer data to its secure destruction, as well as security precau-

tions to be taken when using PCs, thereby heightening employee awareness of security.

https://kr.koreanair.com/content/dam/koreanair/Global/Documents/Footers/kisa_certification_ko.pdf

kr.koreanair.com/content/dam/koreanair/Global/Documents/Footers/kisa_certification_ko.pdf

35

Changes in the Business Environment and Korean Air Today

No company can survive in isolation from society. In order to ensure competitiveness and to grow

together with society, clusters of enterprises, local communities, and infrastructure should be

formed as a means to provide shared value. Instead of cookie-cutter, one-off events, social contri-

bution activities are being transformed toward a strategic paradigm in which long-term corporate

vision and strategic goals are interconnected with economic, social and environmental issues to

provide organizational vitality, an improved corporate image, and better economic performance.

Shareholder Views

According to the materiality assessment, promoting major social contribution activities conducting

social contribution activities that reflect industry characteristics, and measuring the effectiveness

of social contribution activities, and ongoing performance management are all considered

important issues. Korean Air will continue its related efforts in reflection of the characteristics of the

aviation industry, create shared value with stakeholders, and grow together with society toward a

sustainable future.

ISSuE 04Creating shared value with societyWhat efforts is Korean Air making to create shared value?

WHERE

WE STAND

HOW WE

LISTEN

WHAT

WE DO

Stakeholder Views Promoting major social contribution activities,

Measuring the effectiveness of social contribution

activities and ongoing performance management

Category

SocietyRelevance to GRI Local community

Reporting Issues •Conducting social contribution activities

reflecting industry characteristics

•Further involvement of employees and

stakeholders in social contribution activities


Volunteer hours per employee (hours/employee)

1.9 1.7 1.9 -

Social contribution expenses (KRW 1 million)

9,679 12,562 9,227 -

Afforestation* (trees) 80,000 90,000 90,000 90,000

*Total number of trees planted in Baganuur Mongolia and Kubuqi Desert in China




36

1998 Transportation of disaster relief goods to flooded areas in Hubei Province, China

Aug. 1999 Disaster relief goods and aids to flooded areas in North Gyeonggi Province, Korea (Multi-purpose helicopters and trucks deployed)

Aug. 1999 Transportation of disaster relief goods to earthquake areas in Turkey (with B747-400F)

oct. 1999 Transportation of disaster relief goods to earthquake areas in Taiwan (with A300F)

oct. 2000 Donation of disaster relief goods to the earthquake victims in Nigata, Japan (A330 freighter deployed)

Sept. 2002 Transportation of disaster relief goods to victims of typhoon Rusa in Gangneung, Korea (with A300-600)

April 2004 Transportation of disaster relief goods to the North Korean refugees of the Ryongchon Station explosion (with two B747-400)

Jan. 2005 Transportation of disaster relief goods to tsunami victims in Southwest Asian countries

Aug. 2005 Transportation of disaster relief goods to the refugees of hurricane Katrina in the U.S.

June 2007 Transportation of victims’ coffins in the Cambodian plane crash

May 2008 Transportation of disaster relief goods to victims of cyclone Nargis in Myanmar

May 2008 Transportation of disaster relief goods to earthquake victims in Sichuan Province, China

Mar. 2011 Donation of bottled water to earthquake victims in Christ Church, New Zealand

Mar. 2011 Donation of bottled water and blankets to earthquake victims in the northeastern province in Japan

oct. 2011 Donation of bottled water and disaster relief goods to flooded areas in Thailand

Jan. 2012 Monetary donations to victims of typhoon Washi in the Philippines

Nov. 2013 Donation of bottled water and disaster relief goods to victims of typhoon Haiyan in the Philippines

Apr. 2014 Donation of bottled water and blankets to victims and volunteers of the Saewol Ferry disaster in Korea

May 2015 Transportation of disaster relief goods and employee donations to earthquake areas in Nepal

Sept. 2015 Donation of bottled water and disaster relief goods to flooded areas in Myanmar

Mar. 2016 Donation of bottled water and disaster relief goods to victims of cyclone Winston in Fiji

Apr. 2016 Donation of bottled water to victims of Kumamoto earthquakes in Japan

Apr. 2017 Donation of bottled water to floods victims in Peru

Social Contribution Activities Reflecting Industry CharacteristicsMaterial Issue Report

Going beyond financial support and employee volunteer efforts,

Korean Air strives to fulfil its corporate social responsibility by utiliz-

ing our logistics and transportation resources. We have been pro-

viding support for the transportation of needed relief supplies to

earthquakes and tsunami disaster areas and to refugees, and have

offered free flight service to Korean expatriates in difficulty.

Relief aid for Fiji cyclone and Japanese earthquake victims Utilizing its logistics and transportation resources, Korean Air has

been offering no-cost transportation of relief supplies in the event

of disasters. In 2007, a dedicated disaster relief team was created to

increase the efficiency of rescue activities, aircraft and helicopter

deployment, and relief goods support. In March 2016, Korean Air

provided emergency support, including dry biscuits and bottled

water, to the victims of the deadly Cyclone Winston that ravaged

Fiji, and dispatched clothes collected by the Fiji Embassy. Emergen-

cy relief supplies were also delivered to victims of Kumamoto earth-

quakes in Japan in April 2016.

Free flights to Korea for Korean adoptees Korean Air has been offering free tickets to Korea to international Korean

adoptees attending events in Korea arranged by the International Kore-

an Adoptee Service (InKAS). Since 2010, a total of 40 adoptees aged 18

or older have been given the opportunity to visit and experience their

country of birth. The program helps them to understand the history and

culture of Korea while serving as a bridge connecting the nation where

they were born with the one where they grew up and call home.

37

oct. 2008 Book donation to Hongshan Elementary School in Beijing

2009 Book donation to an elementary school in Wuhan

June 2010 Dream Library at an elementary school in Xian

July 2013 Korean Air Dream Library at an elementary school in Liaoning Province through

piggy bank relay fund-raising on the A380 as part of the Caring Mind Project in

China

oct. 2014 Donation of 2,000 books, bookshelves, computers and other educational and

sports equipment to an elementary school in the Hunan Province

June 2015 Donation of 2,000 books, bookshelves, computers and other educational and

sports equipment to Phudong Elementary School in Liping County of the

Qiandongnan Prefecture within Guizhou Province

July 2016 Donation of 2,000 books, bookshelves and sports equipment to Jingfu

Elementary School in Huachuan County of the Hei Long Jiang Province


As part of its efforts to protect local ecosystem, Korean Air transports only live animals with

valid permits in accordance with the Convention on International Trade in Endangered Spe-

cies of Wild Fauna and Flora and IATA’s Live Animal Regulations. It has banned the transporta-

tion of shark fins and monkeys destined for laboratory use.

Caring Mind, the Dream Library project for children in ChinaStarting in 2010 as part of Korean Air’s social contribution project in China, eh-shim, roughly

translated as “caring mind,” the Dream Library project builds and donates libraries to under-

developed provinces in China. To date, Korean Air has donated libraries in six cities, including

Xian, Huangshan, Kunming and Shenyang. In 2016, the beneficiary was the Jingfu Elementary

School in Huachuan County of the Hei Long Jiang Province, where we donated 2,000 books,

bookshelves, and sports equipment.

Books and library donation

The program helps them to understand the history and culture of

Korea while serving as a bridge connecting the nation where they

were born with the one where they grew up and call home.

Transportation of a Korean expatriate in a coma In September 2016, Korean Air helped a Korean expat in Brazil

who had been in a coma for a year after being shot in the street,

but whose family could not afford the flight to Korea to for medi-

cal treatment. Since the patient needs to remain prone during the

flight, a stretcher taking up six seats must be used. The airfare for

such a stretcher is six times higher than the average cost. Despite

fund-raising efforts of the association of Korean expatriates in Brazil,

the family of this patient still suffered from serious financial difficul-

ties. Korean Air covered all the transportation expenses while ensur-

ing his safe travel from departure in Sao Paulo to arrival in Incheon.

Transportation of pandas with a special Aircraft Since it provides a suitable environment through the temperature

control and ventilation systems and requires less time compared to

other methods, air transportation is one of the safest transportation

methods for live animals. In March 2016, Korean Air securely trans-

ported a pair of pandas from Qingdao, China to Incheon using a spe-

cial cargo aircraft. Pandas are endangered animals with only 2,000

or so remaining in the wild. Based on our years of experience and

know-how in live animal transportation, the temperature in the car-

go compartment was set at 18℃ and a veterinarian and zookeeper

were in attendance to oversee their health conditions. A non-vibrat-

ing vehicle was used to minimize stress.

38

Further Involving Employees and Stakeholders in Social Contribution Activities

Volunteer group Registration date Members (persons) Major activities

Alliance of Christian gatherings

2003.12.01 Christian gatherings•New year’s concert, and overseas volunteer

activities

Crew Christian gathering

2003.12.01 Cockpit and cabin crew (80) •Counseling for teenage runaways

Didimdol volunteer group

2003.12.01Gimpo maintenance Christian gathering (30)

•Facilities for the mentally-/physically-impaired•Local child centers

Yesarang volunteer group

2003.12.01General sales Christian gathering (30)

•Nursing home for the elderly suffering from dementia

Sanasa (People sharing love)

2003.12.01 Bucheon motor plant (41)•Bathing support, and helping child breadwinners•Picnic with those with disabilities

Silver wing supporters

2003.12.01Cockpit crew and trainees (1,202)

•Supporting child breadwinners•Volunteering at social welfare centers•Improving residential environment

Korean Air Stewardess Alumni (KASA)

2003.12.01 Stewardess alumni (600)•Helping child breadwinners•Scholarship programs

Dasom Nanumhoe 2003.12.01 Cabin crew (150)•Visiting centers for children with disabilities•Visiting orphanages

Sarang Naumhoe 2004.01.14Busan civil aircraft manufacturing plant (60)

•Bathing support for those with disabilities•Cleaning dormitories and cafeterias

Sky Love 2004.09.10Customer service branch at Incheon int’l airport (100)

•Running English classes•Visiting senior care centers

Geumgwanhoe 2005.03.03Busan aerospace business division (100)

•Supporting the elderly living alone, underprivileged children and multi-cultural families•Environment cleaning event

Gonihoe 2005.04.28 Female cabin crew•Food distribution support at senior welfare centers•Sponsoring the elderly living alone and children

from low-income families

Dasom Maru 2006.03.10Customer service branch at Jeju airport (65)

•Sponsoring those with disabilities

Seoungwoohoe 2006.05.09 Male cabin crew •Sponsoring those with disabilities

Employee volunteer groups


Employees volunteer activitiesGuided by the belief of founding chair-

man Cho Joong-hoon, ‘Profits made by a

company must be returned to the society

that made it possible,’ Korean Air takes

part in social contribution activities in a

variety of areas. Since December 2003,

all employees of Korean Air have volun-

tarily donated up to KRW 1,000 from their

monthly salary (up to KRW 10,000 for ex-

ecutives), and the company matches its

employees’ charitable contributions.

There are 27 volunteer groups consisting

of employees working in various fields

and locations, and regularly conducting a

wide range of activities. Part of the funds

collected through employee donation

is used to support the activities of these

groups.

39

Volunteer group Registration date Members (Persons) Major volunteer activities

Fountain of Love 2006.06.09 Maintenance training team (200)•Improving the living environment for those with disabilities•Donating daily necessities

Little Dream Tree 2007.04.09 Busan aerospace business division (13) •Teaching volunteer work at elementary schools

Hanbat Saranghoe 2007.10.02 R&D center (10)•Visiting orphanages and donating supplies•Helping underprivileged children and youth

Do Dream 2008.04.21 operations control division (280)•Supporting low-income families•Supporting the elderly living alone

Medical volunteer group 2008.09.05 Korean Air Aeromedical Center (67) •Providing medical service to people in need in local communities

Catholic volunteer group 2009.12.22 Cockpit crew department (20)•Bathing support for those with disabilities•Improving residential environment

Gosari 2011.02.11 Busan civil aircraft manufacturing plant (7) •Helping the mentally-impaired

Sky Angels 2011.03.02Association of cabin crew volunteer groups(Seungwoohoe, Gonihoe, Christian gathering, and Dasom Nanumhoe)

•Conducting volunteer activities with those with disabilities•Sky Love Bazaar•Kimchi-making events for the underprivileged and those with disabilities

in Ganseo-gu, Seoul

Dubit Narae 2011.03.08Labor-management cooperation office (26)

•Conducting volunteer activities with those with disabilities•Helping neighbors in need

Love Sharing 2014.02.05 Catering business division (36) •Sharing activities through talent donation (such as cooking)

Jeongseok University 2014.02.05 Jeongseok University student council (15) •Mentoring for students in orphanages

KALMAN Singers 2014.03.07 In-house choir (65) •Donating daily necessities to neighbors in need in Ganseo-gu, Seoul

Buddhist gathering 2014.06.02 Flight operations division (15)•Helping neighbors in need in Ganseo-gu, Seoul•Promoting a lotus lantern hanging event praying for safe flight operations

2013 2014 2015 2016

Company donation 10,201 9,419 12,390 9,067

Voluntary donation* 203 260 172 160

Total 10,404 9,679 12,562 9,227

Social contribution expenses(KRW 1 million)

*Humble monthly donation from employees

2013 2014 2015 2016

Employee (persons) 4,129 4,102 3,851 4,370

Average volunteer hours per employee (hours)

2.0 1.9 1.7 1.9

Employee volunteer hours


40

Korean Air Green Ecological Park’ in the Kubuqi Desert in

China(10,000 trees)

2016

4.61million m2

136

2014

4.01million m2

120

2010

2.84million m2

89

2007

1.67millionm2

56


Social contribution activities with stakeholdersKorean language audio guide service at the world’s three

most famous museums and other locationsWith its various

cultural sponsoring activities including underwriting Korean lan-

guage service at the Louvre, British Museum, and Hermitage Muse-

um, as well as Le Musée d'orsay, Korean Air is striving to fulfill cor-

porate social responsibility. Going forward, Korean Air will continue

to support the world’s leading museums by serving as a conduit to

promote the beauties of Korean culture worldwide and raises the

international profile of the Korean language.

Global tree planting projectThe ‘Korean Air Green Ecological

Park’ in the middle of the Kubuqi Desert in China is a restoration

project in partnership with the Future of Forest of Korea and the

All-China Youth Federation that has been conducted for 10 years

since 2007. In 2016, 70 Korean Air employees and 50 college stu-

dents from China planted trees, totaling 1.36 million trees growing

on an area size of 4.61 million square meters.

Since 2004, the Korean Air Forest project has been underway in Baganuur, Mongolia with

Korean Air employees and locals planting trees every year. In the first year of tree planting,

the extreme daily temperature rage, dry weather, and a lack of understanding of local for-

estry knowledge made it difficult for the trees to survive. However, Korean Air trained local

residents in caring for the trees in an organized manner, and hired local experts to improve

irrigation and fertilizer. As a result, the survival rate of the trees has surpassed 80%. In 2016,

more than 10,000 trees were planted, including poplar, golden trees and sea buckthorn.

In particular, the profits from sea buckthorn fruit sold to make vitamin drinks is benefitting

local communities. A former desert wasteland has been converted into a forest of 110,000

trees spanning an area of 44 hectares. Meanwhile, Korean Air has been donating education-

al computers every year to Bolovsrol and Gun Galutai national schools, which take part in

the project.

Korean Culture Promotion agreement with the National Museum of KoreaKorean

Air has been sponsoring the Nat’l Museum of Korea for the promotion of Korean cultural

heritage and history since first signing an agreement in 2012. In July 2016, both parties

held a ceremony extending the agreement. Under the renewed understanding, Korean Air

will sponsor eight exhibitions in museums at home and abroad over the next two years. It

will also provide transportation of artifacts, discounted flight tickets for exhibition staff, and

exhibition promotions.

Korean Air pop-up cafe for sharingSince 2011, Korean Air has been holding a bi-month-

ly event called ‘Pop-up Café for Sharing’ with its SNS subscribers. As part of its global sharing

activities, this event aims to help the children in need around the world. The proceeds from

this event are donated to the ‘United Help for International Children organization’.

41

Dream Maker

•Talent fostering (Jeongseok/Inha

Academic Institutions)

•“Dream Library” Project in China

•Korean Air Future Artist olympiad

•“Make Your Dream Come True in Jeju”

•Haneul Sarang (Sky Love)

English Class

•Fascinating Travels

with Korean Air

Environmental Protector

• ‘Korean Air Forest’ in Baganuur Mongolia

•Kubuqi Desert in China

•Sapling distribution event

on Arbor Day

Cultural Sponsorship

•Sponsorship to Korean language

audio guide service at the world’s

three most famous museums and

other locations

• Ilwoo Space (gallery) & Ilwoo

Photography Awards

Sport Sponsorship

•official sponsorships for international sports

•Excellence Program

(Sports player patronage program)

•Women’s table tennis team

•Korean Air Jumbos volleyball team

•Korean Air Chairman, Cho Yang-ho,

serving as the official chairman of the

Korea Table Tennis Association

•Korean Air President, Cho Won-tae,

serving as the commissioner

of Korean Volleyball Federation


Sharing

Community Volunteering

•Humble monthly donations

•Sky Angels’ volunteering activities

(such as bazaars and kimchi-sharing

events)

•Habitat for Humanity

•Sisterhood ties with rural villages

•Community volunteering around

the globe

Disaster Relief

•Transportation of disaster relief goods

•Disaster relief aids

Global Community Volunteering

•Global Community Volunteering

in the Philippine and Malaysia

42

Activities 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Humble monthly donation from employees

Afforestation in Mongolia

Rice donation

Sisterhood ties with rural villages

Sky Love Bazaar

Sponsorship of Korean language audio guide service at international museums

Love & Care Plans

Medical volunteering of the Korean Air Aeromedical Center

Inviting underprivileged children to Jeju Island

Free flight tickets to Korea for internationally adopted ethnic Koreans

Sisterhood ties with military units

Major social contribution activities

Global Community Volunteering


Korean language audio guide service at the world’s three most famous museums

(the Louvre, British Museum, and Hermitage Museum)

Global project to provide medical treatment to children patients

(Iraq)

Global volunteer activities

(Bicol in the Philippines /

Penang and Gopeng in Malaysia)

Love & Care Plans in ChinaGlobal tree planting activities

(Baganuur, Mongolia)

43Photo by Kim Jeong-nam in Udaipur, India – Among selections during the 22nd Annual Korean Air Travel Photo Contest

2017 Korean Air sustainability report

SustainingExcellence

BOARDING PASS

India

India is the cradle of civilization in South Asia and the

birthplace of Buddhism. The name of the country

is derived from the Indus river. It is the seventh-

largest city in the world in terms of area, and with a

population of 1.3 billion, the second-most populous.

Udaipur, also known as the City of Lakes or India’s

Europe, is located in Rajasthan State. It is a popular

honeymoon destination among Indians.

44

49

56

60

61

44

Major Performance

Flight hours(1,000 hours)

1969

20

1980

105

1990

202

2000

385

2010

582

2016

625Fleet(aircraft)

1969

11

1980

37

1990

72

2000

112

2010

128

2016

160

Cargo transportation (10,000 tons)

1969

0

1980

14

1990

51

2000

128

2010

180

2016

157

Passengertransportation (10,000 persons)

1969

70

1980

360

1990

1,226

2000

2,207

2010

2,274

2016

2,684

Operating profit (KRW 100 million)

1969

36

1980

5,587

1990

16,791

2000

55,590

2010

112,788

2016

115,029 Capital stock(KRW 100 million)

1969

15

1980

284

1990

1,740

2000

3,378

2010

3,668

2016

3,698 Total assets(KRW 100 million)

1969

57

1980

7,374

1990

29,033

2000

107,480

2010

178,885

2016

227,060

Creating Economic Value

45

Investment Performance Results

2014

13,340

2015

32,428

2016

13,669

2014

3,102

2015

2,358

2016

4,919

2014

16,442

2015

34,786

2016

18,618

Aircraft (KRW 100 million) General(KRW 100 million) Total (KRW 100 million)

Stakeholders 2016

EmployeesLabor expenses 15,216

Welfare benefits 2,893

Shareholders Dividends -

Creditors Interest expenses 4,002

Tax serviceCorporate tax

expenses14

Local Communities Donations 101

Suppliers

Rental 2,880

Fuel expenses 21,901

Manufacturing

expenses8,768

Airport expenses 12,199

Total 67,974

Economic value distribution to stakeholders(KRW 100 million)


46

2017 Business strategies and key tasks

Establishing a sustainable business structure that generate profits even in a rapidly changing business environment

•Comply with all safety regulations and processes

• Avoid attempts at excessive savings on safety-related costs

•optimize route and fleet operations and increase the operation rate

•Enhance productivity per employee

•Maintain cost per supply under increased profit per supply

•Devise emergency measures to minimize the impact of sudden changes in oil prices or the exchange

•Forecast shifts in market trends by efficiently utilizing our management system

•Proactively respond to issues through the speedy and flexible decision-making process

•Respond to changes in the industry by diversifying the revenue base

Ongoing efforts to ensure operational safety

Improving unit cost with better resource

productivity

Ensuring stable profits through anticipating changes in the business environment and

taking proactive measures

Business Goals and StrategiesAccording to statistics from the Ministry of Justice, the number of

outbound Korean air travelers increased by 16.3% and the number

of inbound foreign passengers rose by 33.0% year on year, while

the total number of inbound and outbound international passen-

gers went up by a record 23.0%.With the total international pas-

senger traffic growth forecast by International Air Transport Associ-

ation (IATA) to be 5.9% for 2016 and 5.1% for 2017, a robust growth

similar to that of 2016 is expected for 2017. Continued growth is

also expected in cargo traffic, with predicted gains of 3.4% in 2016

and 3.3% in 2017.


In 2017, Korean Air aims to achieve

KRW 12,220 billion in sales and KRW 840 billion in operating profit under a management policy of establishing a sustainable business structure that generate profits even in a rapidly changing business environment.

47

| MINI C ASE | New and future routes in 2016 and 2017

In a bid to secure a new growth momentum, Korean Air is actively expanding its network and exploring new markets.

In 2016, we added new routes including Busan-Taipei in January, and Incheon-okinawa and Incheon-Guiyang in May. In December,

flight service was launched between Incheon and Delhi, a center of trade and commerce in northern India. Going forward,

we will continue developing new routes with growth potential.

New routes added (2016) The Northeast Asian network was expanded and new

long-distance routes added

RouteOperating

carrier

Flight frequency per week

Service launch

Busan-Taipei B737 7 2016.01

Incheon-Okinawa B777 7 2016.05

Incheon-Guiyang B737 7 2016.05

Incheon-Delhi A330 7 2016.12

New routes planned (2017)Expanding the network by adding high-demand routes

RouteOperating

carrier

Flight frequency per week

Service launch

Incheon-Barcelona B777 3 2017.04

Increasing high-class ticket sales

Increasing high-class ticket sales with new high-tech aircraft models featuring cutting-edge first- and business-class seats while pursuing the premium and economy-class markets through efforts in alliance marketing

Expanding new markets

Developing new markets with high growth potential, such as operating non-scheduled flights in cities where there are no scheduled services, thereby expanding the joint operations network and securing additional revenue sources

Strengthening cooperation

between airlines

Expanding flight schedules in cooperation with SkyTeam members such as through code-sharing and revenue management (with Delta airline), thereby enhancing customer convenience

Promoting customer relations

marketing

Improving flight reservation features on the website and through mobile devices, as well as refining the reservation/ticketing process

Passenger Business StrategiesIn 2017, it is expected that the domestic aviation market will con-

tinue to grow with a rise in the number of Korean passengers fol-

lowing that of 2016 and with demand for international air travel

remaining strong. However, potential risk factors for increasing

cost still exist, such as a decrease in travel demand caused by in-

ternational political events and instability in oil prices and the Ko-

rean won exchange rates due to concerns over protectionist US

trade policy. In order to meet these challenges head-on, Korean Air

has put in place four operational strategies to achieve sustainable

growth in this sector.


48

Cargo Business StrategiesKorean Air’s cargo business boasts of outstanding transportation

services, global network and a broad range of products and ser-

vices. These advantages propel the cargo business into imple-

menting the following strategies to further accelerate growth

following the steady recovery of the global economy and our in-

creased presence in new markets

Aerospace Business StrategiesAs Korea’s leading systems integration company for unmanned ae-

rial vehicles (UAV), Korean Air is actively developing its UAV lineup

and channeling its R&D resources toward entering domestic and

overseas markets. After acquiring Korea’s first UAV certification, the

midrange surveillance UAV known as KUS-DUAS, is currently in pro-

duction. Meanwhile, the development for a large, strategic-grade

unmanned reconnaissance aerial vehicle system is scheduled to

be completed in 2017.

Achieving quality growth focused on internal strengths

and stability

• Developing a UAV lineup and channeling its R&D resources toward entering domestic and overseas markets

•Completing the development for a large, strategic-grade unmanned reconnaissance aerial vehicle system in 2017

Increasing sales of high-profit

products

•Increasing sales capabilities and profitability by focusing on selective highly profitable service items, such as mailing and fresh cargo transportation

Continuing aggressive market

development

• Maximizing profitability in growth markets by increasing supply in Mexico, Canada and Vietnam while accelerating entry into South America in pursuit of a new revenue source and increasing a third-party transportation service in overseas markets including Southeast Asian/China and Europe/Middle East markets via Uzbekistan and Navoy.

• Improving profits through structure optimization to expand revenue from cargo service of passenger flights while taking full advantage of new aircraft models with flexible operation of cargo flight schedules

Enhancing efficiency in

supply operation

•Maximizing profitability putting the available supply to full use while enhancing the quality of service through enhanced transportation business management

Other Business StrategiesKorean Air operates other businesses ancillary to its core business-

es of air transportation and aerospace, including catering and in-

flight sales.

Catering•Developing various new menu items to better

serve customer needs

In-flight sales• Increasing sales efficiency and maintaining

higher quality of products


49

Talent Management

Human Rights and Employee CommunicationLabor-management cooperation Korean Air ensures its em-

ployees the right to freedom of association or collective bargaining

as stipulated by the ILo. In addition to annual labor-management

council meetings (four times), annual wage negotiations (one), and

biennial collective bargaining (one), additional collective bargain-

ing or labor-management councils are held as necessary. When

there is a need for a new system or for changes to existing ones,

a labor-management project team is established to cooperate on

the related issues.

Communication Plaza Driven by the chairman Cho Yang-ho’s

commitment to improving the corporate culture and structure

through interactive communication and consensus, Korean Air

opened the Communication Plaza as a virtual venue for commu-

nication in March 2015. It serves as an online channel for sharing

ideas and ventilating grievances among employees. The anonym-

ity policy guarantees the free exchange of ideas and comments

on issues among individuals and teams. Plus, suggestions and

questions are addressed by relevant departments with replies and

corrections, which further promote interactive, real-time commu-

nication within the organization.

Major Performance

In 2016, a total of

228 suggestions and inquiries from employees were addressed through the Communication Plaza. offline programs designed to help relieve the psychological stress of those working in front-end customer services were provided to 627 employees. Scholarships were delivered to

140 employees whobegan work on a master’s degreein aviation or logistics.

The industrial accident rate has remained at a low level of 0.06%.

Communication Plaza statistics in 2016(cases)

Suggestions 131

Inquiries57

others26

Compliments14

Total 228

union members

Non -unionized employees Total

Membership rate

General 10,577 4,104 14,681 72.0%

Flight operations

Pilots’ union

1,094

558 2,282

47.9%

Pilots’ new union

630 27.6%

Labor unions(persons)

Grievances resolution channels Korean Air has a Grievances

Resolution Committee and HR Counseling office to more effec-

tively deal with employees’ grievances and suggestions in order

to raise morale. In 2016, all of 15 grievances received through the

channels were appropriately dealt with and concluded.

50

Happiness campaignFollowing the 2016 campaign, the theme

for 2017 is ‘happiness’ and various programs are being operated

under the slogan of ‘HAPPY ToGETHER’. The campaign is designed

to help employees to find small moments of happiness in their ev-

eryday working environment, inspiring a positive corporate culture

that in turn uplifts our customers and local communities.

Happy HourAt 3 p.m. on the last Wednesday of every month, all

employees take an hour off to relax with colleagues over some re-

freshments for ‘Happy Hour'. It is valued as a time for employees to

bond with one another. Employees leave comments on this event

and the team of the best comment receive refreshment supplies

as a prize.

Happiness Sharing EventSince 2015, Korean Air has held a ‘Hap-

piness Sharing Event’ where employees find small happiness in

their everyday working environment, boosting the organization as

a whole. At each event, we select local delicacies and bring them

to different work sites as a surprise, and have received a positive

response from employees.

Hanjin Expedition Team We have been hosting a quarterly

program called the Hanjin Expedition Team focusing on employ-

ees the Hanjin Group and their families. With participants in the

Improved recruitment procedures Starting in 2014, Korean Air

discontinued its own job adaptability test (KALSAT) for a new sys-

tem of recruitment, placing primary weight on the statement of

purpose (SoP) and interviews. We also operate recruitment pro-

cedures considering the characteristics of each job. For example,

applicants for cabin crew positions are put up against on-the-job

situations to assess their resourcefulness and job adaptability.

Female employees As of the end of December 2016, Korean Air’s

total workforce is 20,844 and female employees accounted for

44 percent, or 9,189. Korean Air has increased the ratio of female

employees while setting the industrial standard to promote the

welfare of female employees at work through customized benefits

plans. In addition to the legally required benefit programs, female

flight attendants are allowed to take maternity leave on the day

they become aware of their pregnancy. All female employees are

program gaining a chance to experience state-of-the-art aviation

equipment and logistics facilities, it provides as an opportunity for

the children of employees to satisfy their curiosity about aviation

and logistics and better understand their parents’ workplaces. Cur-

rent employees are encouraged to develop a sense of proud in

their company.

also given the freedom to take leave for fertility treatment at any

given time. As a result, the retention rate after their returning to

work is rising every year, and the percentage of male employees

taking parental leave is also gradually increasing.

Localization of employment Keenly aware that localization is

imperative to successful global expansion, Korean Air actively em-

ploys and develops high-caliber local residents from global mar-

kets. Job applicants are not discriminated against on the basis of

their nationality, cultural background, religion or other factors. our

human resource development (HRD) policy is grounded in both

merit and performance, while multiple programs exist that are de-

signed to enhance the competency of local employees with the

objective of managerial promotion.

Locally-hired employees at managerial level

※As of Dec. 31, 2016. Expatriates are included in ‘overseas employees’ (executives not included).

Overseas employees

Percentage of locally-hired employees

Percentage of locally-hired

managers

2,449 persons

90.8% 13.7%

Talent Management

51

Employee Competency BuildingKorean Air is developing and operating various programs to foster

global talent based on its management philosophy that "the foun-

dation of corporate management is people, and positive changes

in people start from education".

Training programs To nurture talent with global competitive-

ness, Korean Air’s specialized education system consists of a broad

range of multi-level courses on business administration, specific

job skills, and services targeting all employees in all positions and

job duties. The business management course helps all employees,

from new employees to executives, develop job skills required for

their respective positions, while job skill courses and service cours-

es offer different levels from beginner to advanced job skills.

Execu-tives

Gen-eral

man-agers

Dep-uty

gen-eral

man-agers

Man-agers

Assis-tant

man-agers

Rank-and-file em-ploy-ees

KEDP

orientation for new executives

KTDP

Job competency improvement

programs

(mandatory online pro-

grams by job position)

Airline Management

School (AMS)

LeadershipSchool

HarmonyWorkshop

KLDP

overseas (local)

employ-ees dis-patched

to the head-

quarters

overseas employ-ees with excellent perfor-mance

overseas manager training

overseas oJT

program

MBA

Program for new career-

employ-ees

Internal instruc-

tor training

orientation for new employees and basic course on air transportation

Business management (new employee/manager training) programs

Sales & Transportation

Mainte-nance &

Engineer-ing

Aero-space

CabinFlight opera-tions

Man-age-ment

Expert

Prac-tice

Service clinic

Regular training

by aircraft model

Civil/military aircraft

R&D advanced

Training for line/

team managers

Aircraft transition training for cap-

tains

Sales man-age-ment

Cargo man-age-ment

Pas-senger man-age-ment

Expert training

by aircraft model

Civil/military aircraft

R&D expert

Expert training

for upper class

Promo-tional

training for

captains

Sales expert

Cargo expert

Pas-senger expert

Aircraft mechanic training

Aircraft basics

Basic training for new employ-

ees

Aircraft initial/

transition training for first officers

Sales prac-tice

Cargo prac-tice

Pas-senger prac-tice

Service management

Service practice

Service Basic

Specialized programs by job

Talent Management

52

Scholarships for graduate to school employees(persons)

2014

189

2015

341

2016

481

New and upgraded programs In 2016, various courses were

newly added and/or improved. The Korean Air Leadership School,

a new course for newly-promoted deputy general managers and

captains, offered various programs to raise awareness of their new

roles, enhance their leadership capacity, improve teamwork, and

help them train subordinate staff. The Harmony Workshop for em-

ployees recently promoted to assistant managers has significant-

ly adjusted its curriculum and added a program on cultivating a

mindset to promote a culture of communication and harmony, as

well as of achieving mutual growth.

Awareness-raising for strengthening aviation safety and

security A training course for managers was designed in order to

raise awareness of safety and security and enhance risk manage-

ment competencies throughout the year. Executives of Korean Air

and affiliates of Hanjin Group, as well as managers at home and

abroad joined the course consisting of safety management sys-

tem, safety by division, on-the-job training in aviation security and

ground handling, and on-site experiences.

Global talent development Korean Air also devotes itself to

training talented, locally-hired international employees. A variety

of experience programs are in operation to help international em-

ployees better understand Korean culture and traditions as well as

providing job skills and management competency-building cours-

es. The Human Resources Development Center plays a pivotal role

in developing and providing training courses to serve the specific

needs of international employees, while the close collaboration

between the HRD Center and overseas regional headquarters fa-

cilitate developing special training courses customized to specific

needs of local markets overseas. At the same time, we foster and

support job and service lecturers for each regional market and have

reinforced the English-based education portal, providing 260 edu-

cational content in English for the convenience of overseas learners.

Lifelong learning support Korean Air established Jungseok

College, Korea’s first tech school run by a private company, for its

employees in 2000 in order to support the lifelong learning. All

employees attending the university get full-tuition scholarships

with national certificated degrees upon their graduation and can

transfer to other universities or graduate schools. A total of 1,292

students received a degree, including 861 bachelor’s degrees and

431 associate’s degrees, over the 16 years from its foundation up

through 2017. The company has also prepared a scholarship pro-

gram to support its employees who wish to attend the graduate

schools of Korea Aerospace University, Inha University and other

schools to pick up more specialized skills and knowledge in avia-

tion and logistics transportation industries.

Online training on human rights Korean Air is conducting a

range of training programs to encourage a healthy and positive

working life for employees. Based on our belief that sound bodies

and minds among employees leads to the best customer service

and work performance, we provide over 50 online programs relat-

ed to human rights and health. At the same time, a curriculum to

promote self-esteem as an employee of a global airline and raise

awareness of the importance of self-management is provided on

a regular basis.

Talent Management

53

Employee HealthOccupational health management In order to prevent industrial accidents and to maintain a health working environment, the Korean Air

Aeromedical Center* carries out the following activities.

Category Activities

occupational

health

• Conducting health checkups and medical examinations according to the Aviation Safety Act and occupational Safety and

Health Act

• Tracking employee health status after screening

• Planning and operating various health promotion projects for disease prevention

- Providing psychological counseling as well as advice on nutrition, exercise, and diabetes from experts

- Publishing a newsletter on mind health as well as health information sheets on infectious and chronic disease prevention

Industrial health

training

• Conducting online heath training four times per year to provide various health information

• operating collective training programs tailored to job characteristics

- Cockpit crew: aviation physiology, and health management

- Cabin crew: CPR and first-aid treatment, and prevention of muscular skeletal disease as well as of industrial accidents

- General and maintenance employees: basic knowledge of health at work, and CPR

- All employees: mental health and stress management

Working environment

management

• Assessing the level of harmful factors exposed to employees (such as noise and dust) to protect their health, and creating a

healthy working environment through improvement activities

• Monthly rounds of worksite visits by a group of doctors, nurses and industrial hygiene management engineers in order to

provide health training and counseling and to check the working environment

Muscular skeletal

disease prevention

• Investigating harmful factors for musculoskeletal system, including heavy cargo handling and VDT** syndrome, and

conducting ergonomic improvement activities

• Measuring basic physical fitness regularly and providing counseling for customized exercise programs to help cabin crew

improve their physical strength thereby preventing musculoskeletal diseases

*In Korean Air Aeromedical Center is equipped with examination facilities, equipment, and medical computer systems certified by the US Federal Aviation Administration. Forty specialists from a range of medical fields, such as aviation medical examiners, nurses, professional counselors, and hygiene management engineers, are in charge of the health management of all Korean Air employees including cockpit and cabin crew.

** VDT(Visual Display Terminal Syndrome) It refers to symptoms such as headache and vision problems caused by electromagnetic waves from computer screens.

Employee mental health management Employees’ mental

health affects the quality of life of individuals as well as work effi-

ciency and productivity within the company. Korean Air is provid-

ing mental health care programs for employees, including those

working in service fields.

online education programs are being operated to help all employ-

ees to take an interest in mental health care, and intensive offline

training is provided to employees working in front-end customer

service. In the “Take a Rest” Psychological Counseling Center, full-

time professional counselors help employees thorough one-on-

one counseling on job stress, emotional issues and family con-

cerns, as well as offering psychological tests to help illuminate

personality traits, emotions and interpersonal relations.

We ensure that strict confidentiality is always maintained so em-

ployees can access the center in a more comfortable and trusted

environment. In addition, an anonymous online bulletin board is

available for employees who find it difficult to visit in person. If a

case requires in-depth examination or treatment, it is transferred to

a consulting psychiatrist at a partner university hospital.

Talent Management

54

Employee SafetyKorean Air has been striving to secure employees' safety and

health and to create a healthier workplace without any industri-

al accidents. Job Hazards Analysis, introduced in 2008, to focuses

on job tasks as a way to identify hazards beforehand. It has since

allowed us to reinforce risk prevention, while getting employees

involved in the assessment of potential risks on the job. By scru-

tinizing risk factors, we take systematic steps to deal with safety

issues. The measures taken are not limited to management aspect

such as training and compliance with regulatory procedures, but

on engineering measures such as introducing equipment and im-

proving facilities until the required safety level is met. In addition,

periodic check-ups are implemented to ensure effective safety

management. In 2016, the Job Hazards Analysis was conducted for

both Korean Air and its suppliers, and in 2017 we will continue to

provide training and on-site support to help suppliers to promote

their occupational safety.

Curriculum Lecture Audience 2014 2015 2016

Service practice

Stress management to promote mental health

Employees in passenger and cargo transportation fields

85(7th)

502(22nd)

291(17th)

Under -standing of our partners

Health management: Stress

New call center employees from service suppliers

266(13th)

366(19th)

237(14th)

Captain leadership

Understanding of mental health

Cockpit crew to be promoted to captains

71(4th)

64(3rd)

99(4th)

Offline mental health education(persons)

Efforts to promote the emotional and mental health of em-

ployees Emotional labor refers to jobs that requires workers to

manage their emotions when responding to customers. As greater

awareness of emotional labor has developed in recent years, relat-

ed bills have been submitted to the National Assembly in Korea. In

this area, Korean Air is providing intensive mental health care sup-

port, such as customized mental health education and periodic

stress evaluation, to call center employees and cabin crew whose

jobs include emotional labor. In recognition of these efforts, Kore-

an Air was selected as one of leading companies at an emotional

labor workplace inspection by the Ministry of Labor in 2016.

Moreover, from 2017, we are including a mental health checkup

as part of regular health examinations for employees. Employees

fill out a checklist on which customized mental health information

is provided, and psychological counseling is offered to employees

classified as falling into the high-risk group.

Offline mental health education

Sleeping and

health

Wisely coping

with an illness of

the mind

20152014

How to overcome

job stress

2016

our accident-free campaign has motivated employees to stay fully

aware of risk factors on the job since 1995. A merit-based reward

system also encourages furthered safety awareness and on-the-

job prevention. Additionally, the targets are revised to reflect actu-

al safety performance grounded in the past five-year track record.

The latest revision was made in 2014.

Industrial accident rates per 100 employees(%)

National Average

Korean Air

1.00

0.80

0.60

0.20

0.40

0.00

0.49

0.77

0.16

0.71

0.11

0.65

0.08

0.53

0.08

200720042001 2010 2013 2016

0.77

0.49

0.06

*Accident (injury) Rate = Number of injured workers x 100/Annual average number of workers

Talent Management

55

Category Description

Medical and health

subsidies

• Health Insurance Program

• Self-insurance subsidies

(Allowances for the sickness/accidents/death of employees and/or their spouses)

• Subsidies for flu shots

• Medical bill subsidies for overseas flight attendants and any employee on business trips

ranging between USD 200 and 30,000

Leisure life

• 25 to 35 free flight tickets annually

• 252 condominiums located domestically

• Discount for prestigious hotel chains in Korea and overseas

• Sponsoring 28 club activities

Everyday life

• Corporate housing (2,237 households)

• Housing loans

• Scholarships for employees’ children going to high school and college

• Tuition subsidies for employees’ children going to prestigious international universities

• Scholarships and language course tuition subsidies for children of expatriates

• Scholarships to employees going to college and/or graduate schools to study job-related

subjects

Financial stability of

retirement

• Subscription to the National Pension Plan

• KRW 50,000 subsidies to all employees’ personal pension plans

• Korea’s largest size of corporate credit union, and subsidization of contribution to Korea’s

largest corporate credit union upon retirement

Incentives•Merit-based incentives

•Safety incentives

Welfare benefit programsBalance between Work and LifeKorean Air’s welfare benefit programs are available so that employ-

ees can choose benefits from several options. This ensures a more

practical application of employee support for the sake of their bal-

ance of work and personal life. Employees and their families can fly

on any of the routes operated by Korean Air at discounted fares,

which is intended to promote travelling while gaining a global

perspective. other benefit programs include housing, financial

support for the child educational expenses, medical bills, leisure

programs and financial security for retirement.

2016 Major Financial Support

Health insurance premium subsidies KRW 44 billion Allowances for the sickness/accident/ death of employees and /or their spouses KRW 1.73 billion

2014 2015 2016

National pension 349.1 358.5 374.9

Personal pension 101.4 101.1 101.0

Contribution to credit union 111.5 114.0 117.3

Total 562.0 573.6 593.2

Pension funds and contributions(KRW 100 million)

Talent Management

56

Customer Satisfaction Management

Customer CommunicationCommunication on SNSSNS is one of the most efficient interac-

tive communication channels through which companies can be-

come more familiar with their customers. Korean Air makes full use

of SNS to deliver up-to-date flight information in several languages.

It is also an effective channel for marketing, promotion and events

along with travel tips. When major issues arise, it serves as a plat-

form to directly and efficiently express the company’s situation to

communicate and build trust with customers.

Customer-Engaged MarketingGuest House, France (January 8 to June 30, 2016) <Guest

House, France> is Korean Air’s advertising campaign promoting

the value of ‘slow travel’ to contemporary people who are used to

staying busy and doing everything quickly. The campaign shows

the charms of different destinations around France, from Paris,

one of the most popular tourist destinations in the world, to Avi-

gnon, known for its Festival d'Avignon, Moustiers-Sainte-Marie with

Sainte Croix lake and Verdon Canyon, Châteaux in the Loire Valley,

Chamonix-Mont-Blanc, the fairytale village of Colmar, and Hôtel

du Palais in Biarritz. It promoted an event recruiting residents for

guesthouses in each area. over 16,000 applications were received,

each with a 1 in 2,400 chance of winning. The selected residents

were announced through TV commercials and provided with flight

tickets and accommodation to stay in the respective guesthous-

es. Their travel stories were posted online in real time, drawing a

good response. Meanwhile, an "All That France" app offering useful

and in-depth information encompassing art, culture, and gourmet

dishes in France received a high number of downloads.

Guided to India (November 28, 2016 to March 26, 2017) An

advertising campaign celebrating the launch of a new Incheon-Del-

hi route created a new perception of India as a travel destination. In

the Guiding Service series, different messages about healing were

delivered through 15 video postcards featuring scenic tourist des-

tinations in India. and an event sharing the campaign to SNS was

also held drawing a good response.

on the website, an India travelogue competition was held to find

experts on India. To Introduce three types of trips with different

themes for enjoying India, various events were held for each theme

on the website. In the 'Questioning Trip’ section, a daily question

about life was posted for visitors leave their thoughts. The ‘800-ru-

pee Trip’ theme offered information on how to travel India on 800

rupees per day. The ‘Local Trip’ included a Q&A section where the

experts selected through the travelogue competition offered tips

about traveling India.

SNS channel subscribers(persons)

Facebook

366,283

Instagram

39,805

Twitter

194,305

(As of Dec. 31, 2016)

News Twitter

5,065

Google+

38,636

57

Culture MarketingKorean Air Travel Photo Contest Korean Air holds an annual

Korean Air Travel Photo Contest that is open to anyone who likes

traveling and photography. As the nation’s biggest travel photo

contest for amateur photographers, high quality photographs cap-

turing beautiful scenes and natural landscapes as well as the mo-

ments of our daily lives around the globe are submitted every year.

The growing number of international entries is proof of increasing

awareness regarding our contest as an international event. The

23rd contest in 2016 awarded main and special prizes among ap-

proximately 22,000 entries.

College student design contest Korean Air has been hosting

annual design contests targeting university students based on the

theme of “Airplanes in Art” since 2013. Applicants can enter their

work under one of the following four categories: Visual, Product,

Space and Apparel. The event offers aspiring designers the oppor-

tunities to submit their artwork to the contest, helping promote

the Korean art industry.

Ranked 1st in NCSI *

Ranked 1st in GCSI**

Customer satisfaction management awards

**NCSI National Customer Satisfaction index*GCSI GCSI refers to Global Customer Satisfaction Competency Index developed

by Global Management Association (GMA).

2014

Ranked 1st in GCSI

2015

Ranked 1st in GCSI

2016

Rated ‘Excellent’ in a MLIT air transportation service eval-

uationAccording to an air transportation service evaluation by

the Korean Ministry of Land, Infrastructure, and Transport (MLIT)

announced in 2016, Korean Air was rated as "Excellent (A)" in the

full-service carrier category. The evaluation was based on two years

of air transportation service from 2014 to 2015. In terms of evalu-

ation items, liability for damage and user satisfaction were rated

relatively lower compared to safety and on-time operation.

Airline TotalOn-time

operation SafetyLiability for

damage user

satisfaction

Korean Air

Excellent (A)

Excellent (A)

Excellent (A)

Very good(B)

Very good(B)

Air transportation service evaluation: Full-service carrier category

*The evaluation results are classified into six ratings: Excellent (A), Very good (B), Good (C), Fair (D), Poor (E), and Very bad (F).

Korean Air Future Artist Olympiad Korean Air Future Artist

olympiad is a contest geared toward talented elementary stu-

dents who are interested in art and paintings. Since 2009, the

event has been operated as part of our effort to contribute to

the development of art education for future generations and to

awaken others to the joy of their creation. The contest has evolved

into a global event, where both Korean elementary students and

international elementary students from Korea and around the

world participate. The grand prize winner is then printed on the

exterior of Korean Air’s airplanes as the planes go about their daily

routine around the world.

Bibimbap cooking demonstrationKorean Air has been intro-

ducing Korean food at international travel expos in France, Spain,

the USA, New Zealand, China and Hong Kong. on March 8-9,

2017 at the ITB Berlin 2017, visitor to world’s leading travel trade

show were presented with a history of bibimbap and a recipe.

Large numbers of visitors were left with a positive opinion of the

healthy flavors of bibimbap and took a great interest in Korean

food.


58

Efforts to Promote Customer HealthIn-flight air quality management Stakeholders’ interest in in-

door air quality has grown higher than ever due to yellow dust,

particulate matter, and infectious diseases. Considering that aircraft

are operated in a closed environment, in-flight air quality manage-

ment is crucial. Korean Air aircrafts equipped with the state-of-the

art air circulation systems completely sterilize the cabin and filter

our fine particles, providing a clean atmosphere at all times.

Air from outside is sterilized at 200℃ by passing through the en-

gine compressor before entering the interior. The heated com-

pressed air then passes through an ozone purification system that

converts ozone into oxygen, is adjusted at a comfortable tempera-

ture, and then supplied to the cabin. Every two to three minutes,

the air enters an inlet at the top of the cabin to pass through HEPA

filters capturing dust, smoke, bacteria and even microscopic virus-

es down to 1.01-100 micrometers. It is returned through an outlet

at the bottom of the cabin. As fresh air moves from top to bottom

like air curtain, dusts, odors, and carbon dioxide from passengers

are also removed vertically, maintaining a pleasant cabin environ-

ment.

All Korean Air aircraft are disinfected once a month. The operation

of disassembling and cleaning aircraft parts or intensive cleaning is

carried out in a 15-day to two-month cycle.

Air cleaning system in Korean Air aircrafts

5 5

Air flowing out

6

Cabin

4

HEPA filtersAir flowing in

1

2

HEPA filters

3

Air-conditioning & heating system


59

Response to infectious diseasesVarious efforts are being made

to prevent the spread of infectious diseases in response to global

epidemics and expanding overseas travel. In order to quickly re-

spond to outbreaks of infectious diseases, Korean Air has estab-

lished a network with the Korea Centers for Disease Control and

Prevention, and Incheon National Quarantine Station, set up a de-

tailed response plan synched with the nation’s epidemic alert*, and

devised measures for before, during and after flights. We are also

monitoring global health trends through the World Health organi-

zation, US Centers for Disease Control and Prevention, and the Eu-

ropean Centers for Disease Control and Prevention in order to pro-

actively address concerns in the international health environment.

* Epidemic alert stages: Caution – Attention – Alert – Serious

Measures Details

operating

equipment

to prevent

infection

• Loading preventive equipment in aircraft

- A set of protective gear

(N95 mask and protective clothing)

- Hand sanitizer and masks

• Emphasizing hygiene management

including disinfection

- Strengthened quarantine guidelines for

facilities, including airplanes

Establishing

guidelines on

suspected cases

of infection

• Conducting screening procedure prior to

boarding to check for fever

• Implementing a process of managing

suspected cases of infection during flight

Preventing

and protecting

employees from

infection

• operated guidelines for action on

preventing the spread of MERS

- Precautions, how to respond to suspected

cases, and employee management, such

as the quarantine and return to work of

employees subject to observation

• Providing information on MERS and training

on its prevention

- online training, and on-site inspection

and training

• Frequent checks of the health status of all

employees to prevent the spread of disease

Measures taken to respond to MERS in 2015

Measures Details

Strengthening

airplane quarantine

• Quarantine activities for airplanes

departed or arrived from affected

cities

operating equipment

to prevent infection

• Loading preventive equipment in

aircraft

- A set of protective gear (N95 mask

and protective clothing)

Preventing and

protecting employees

from infection

• Providing information on the virus

and precautionary measures for

employees, in particular, the crew and

employees working in affected areas

Measures taken to respond to Zika virus in 2016


60

Win-Win Management

Shared Growth Policy Korean Air strives to promote win-win management that enhanc-

es cooperation and competitiveness and allows mutual benefit by

seeking shared growth with its business partners. We are operat-

ing programs for shared growth based on mutual trust, such as full

cash payments to suppliers, condensing the payment cycle, dis-

patching experts to suppliers. In particular, our aviation and logis-

tics know-hows is being utilized to help SMEs improve their export

competitiveness while seeking cooperation with related industries.

We will continue to develop programs for achieving shared growth

based on cooperation with partner SMEs and relate industries.

Major programs and performanceAs of 2016, Korean Air made all payments to all its 634 suppliers

in cash in a bid to help improve their liquidity. Korean Air’s Sale

& Leaseback program helps ease manufacturing partners’ financial

pressure and management issues as the company purchases ex-

pensive manufacturing equipment and leases them back to the

partners. We also share the gains on cost-savings from joint tech-

nological development with partners on a quarterly basis under

the Cooperation Benefit Sharing program.

In particular, 'local production of advanced aircraft wing parts

(A320 Shacklet)' in partnership with Samwoo Metal Industries was

selected as the "2016 Best Practices in Fair Trade Agreements" by

the Korean Fair Trade Commission, which served as an opportunity

to further strengthen competitiveness of Korean Air and its supplier

Major Performance

'Local production of advanced aircraft wing parts (A320 Shacklet)' in partnership with Samwoo Metal Industries was selected as the

"2016 Best Practices in Fair TradeAgreements" by the Korea Fair Trade Commission.

All payments to allits 634 suppliers (as of 2016) were made in cash to help them to improve liquidity.

through shared growth. In addition to the technology training

programs to enhance our partners’ technological competitiveness

and self-reliance, we also subsidize our partner employee vaccina-

tions and work to secure the most stable of working conditions.

Regular meetings with the CEos of our partners and Quality Sym-

posiums serve as effective communicative channels with partner

to promote shared growth. In accordance with fair business prac-

tices and compliance with the Fair Transaction and Shared Growth

Agreement as recommended by the Fair Trade Commission (FTC)

in 2013, agreements with aircraft manufacturing partners are in

effect accompanied by implementation of the four primary FTC

Standard Subcontract Agreement forms and operation of a Re-

porting Center for Transaction Irregularities.

Major shared growth programs

Paying partners in cash instead of issuing notes to improve liquidity

Leasing expensive equipment in Korean Air’s possession to manufacturing partners

Sharing the profits from joint technological development and resultant cost savings

•An oJT on-site training course for lesser-skilled employees of partner companies• Technological and educational support of

business partners• Meetings with CEos of partners and Quality

Symposiums

Cash settlements

Sale & Leaseback

Cooperation Benefit Sharing

OJT Support

61

Environmental Management

Green Management Policy

We, at Korean Air, are concerned about the sustainable future of the earth and respect the universal values as a member of the global society, and we declare the following Green Management Principles to fulfill our social responsibilities as a leading global airline. We will

1. Improve flight procedures and introduce new aircraft in order to reduce noise and greenhouse gases.

2. Abide by national and international environment laws and all relevant regulations, and apply stricter internal standards.

3. Minimize environmental load through proactive measures and improvement in our performance.

4. Seek to make constant improvement in our performance in order to conserve resources and energy, and manage them efficiently.

5. Carry out training and provide education so that our staff and employees clearly acknowledge environmental goals and actively join the environment protection effort.

6. Promote mutual cooperation with partner firms to execute green management through communication on environmental issues.

7. Openly share all of our green management efforts and the results to the public. 8. Endeavor to protect the natural environment and contribute to the development

of local community through international cooperation.

•Certification standard: ISO14001 certificate•Date of acquisition: Dec. 13, 1996•Date of last issue: Nov. 13, 2014•�Certification body: BSI

(British Standards Institution)•Scope: All divisions (overseas offices excluded)

1) General (flight operations, passenger/cargo transportation, cabin service, and administrative headquarters

2) Maintenance & Engineering (Gimpo, Incheon, and Bucheon bases)

3) Catering (Gimpo and Incheon catering centers)4) Aircraft manufacturing

(Aerospace business division)

Environment Management Strategies & Goals Certification of Environment Management System

Vision

‘Creating value to promotequality of life in harmony with the environment’

2017 Key Tasks

To respond to climate change issues

To have ISO14001 certification conversion evaluation

To conduct preventive checks of environmental facilities

To prepare for chemical substance regulations

Promoting communication

Preparing for new regulations

Enhancing environmental management

Proactively responding to regulations and strengthening green management

62

Energy Consumption and GHG EmissionsJet fuel for aircraft operations accounts for 99% of energy

consumed by Korean Air. In 2016, 420,000 tons of jet fuel

were used at a cost of KRW 2.2 trillion, comprising 22.1% of

total expenditures.

Korean Air burned 4.17 million tons of fuel for aircraft op-

erations in 2016, and the total amount of GHG emissions,

including ground operations, was 13.39 million tons.

Fuel consumption by air transportation (Tons)

2016

4,174,377

2015

4,083,989

2014

4,006,984

GHG emissions(Tons)

Facilities

Total

Air transportation

201620152014

13,283,08612,995,05212,750,860

107,344116,939

13,102,39612,867,799

110,688

13,393,774

2011 2012 2013 2014 2015 2016

Co2 12,186,003 12,662,272 12,361,107 12,625,927 12,868,556 13,152,944

CH4 18 18 18 17 17 17

N2o 387 403 393 401 409 419

Co2eq 12,306,351 12,780,177 12,483,403 12,750,860 12,995,052 13,283,086

GHG emissions by air transportation (Scope1) (Tons)

*2006 IPCC Guidelines for National Greenhouse Gas Inventories Tier 2 are applied in estimating GHG emissions.*GHG emissions from aircraft engine tests (on the ground) and the use of helicopters for non-business purpose are not included.


2014 2015 2016

Air transportation (MJ/RTK) 12.26 12.28 12.36

Facilities

(GJ/KRW 1billion)179.22 176.8 178.62

Energy intensity

63

Responding to the Eu Emissions Trading SystemWith the

2012 inclusion of the aviation sector in the EU Emissions Trading

System, Korean Air (which serves cities in the EU) became subject

to this program. Airlines are being allocated a limited number of

permits to discharge pollutants from 2012 to 2020 based on their

2010 transportation performance. If they wish to increase emis-

sions, they must buy permits on the open markets. Korean Air cal-

culates annual emissions using the ETS-oMS system, has the re-

sults verified by a third party, and buys carbon offsets for any excess

emissions. As B777s with high fuel efficiency are replacing B747s in

the EU region, GHG emissions have actually been declining.

Responding to the Korea Emission Trading Scheme (KETS)

Since 2015, Korean Air has been subject to the Korea Emission

Eu Emissions Trading System Carbon offsets (tons)

Emissions

20,094Permits

offsets

25,59831,069 24,095

2016

4,001

2015

5,504

2014

10,975

Waste In 2016, increased passenger traffic (5.9% based on RTK)

led to a 4% rise in waste generated in the cabin, and the recycling

rate dropped by 2.1% as the use of recycled plastic fell due to de-

creased cargo.

2015 2016

Incineration/Landfill (%) 60.1 62.2

Recycling (%) 39.9 37.8

2015 2016

Discharged8751,019

Designated811754

Total 26,488 27,478

Municipal

24,715 25,792

Waste disposal(tons)


Trading Scheme (KETS) for GHG emissions from domestic aircraft,

buildings, and vehicles. Due to its efforts to cut GHG emissions, in-

cluding the GHG Target Management System prior to the launch of

the KETS, 79,431 tons of carbon reduction has been recognized as

an early reduction credit. In 2016, Korean Air consequently received

the highest number of additional permits in the entire domestic

aviation industry. Nevertheless, aviation is the only transportation

sector to which the KTES is applied, and at a higher-than-indus-

try-average rate. Since the implementation of the KTES, Korean Air

has produced more GHG emissions than its annual permits allow,

mainly because domestic routes operating at a loss are being main-

tained as part of efforts to promote public convenience. Additional

permits were purchased in June 2017 to balance Korean Air’s status,

and its efforts to responsibly manage carbon emissions will continue.

64

Water

Air

Water and air pollutantsWater and air pollutant emissions are

stably managed within internal standards, which are applied at a

level of 50% stricter than the legal requirements.

Pollutant emission level*

*Emission intensity ÷ Legal limit × 100

50

Emission

intensity (%)Legal limit 100

0

50

Emission

intensity (%)Legal limit 100

0

Maximum50

Average10Minimum

1

Maximum70

Minimum1

Average15

Biodiversity protectionAcknowledging the role played by air

carriers, Korean Air is participating in international efforts to pro-

tect biodiversity. The air transport of protected animals and plants,

rare animals, primates, and endangered species is banned under

company policy. In 2010, the International Year of Biodiversity, vid-

eos under the theme of "Many Species, one Planet” were run in

the cabin to urge global citizens to take part in biodiversity pres-

ervation efforts.

In 2013, we banned the shipment of shark fins, which had been

partially conducted, in an effort to protect these at-risk creatures.

In the past, Korean Air transported them only with valid permits

and exclusively in accordance with the Convention on Interna-

tional Trade in Endangered Species of Wild Fauna and Flora. How-

ever, as the movement to curb their distribution and transporta-

tion caught our attention, the decision was made to ban all such

transportation. Korean Air submitted its regulation on this ban to

the International Air Transport Association (IATA) and continues to

participate in various programs to protect the global ecosystem.

Aircraft noiseKorean Air is making every effort to reduce incon-

venience of people residing near airports by minimizing flight

operation noise. Although such noise inevitably occurs, Korean

Air has been seriously implementing countermeasures by aircraft

manufacturers and the International Civil Aviation organization

(ICAo).

Area of noise benefitRunway

Establish on the

Instrument Landing

System(ILS)

Basic continuous

descent approach profile

Conventional

approach profile


65

All Korean Air aircrafts meet the criteria of the ICAo Chapter 4 and

the 6th level criteria, the lowest noise level under Korea’s airport

noise-related laws. The new models, such as the A380, B787, A321

NEo and CS300, that Korean Air plans to introduce, generate less

pollution and noise, essentially making for a more environmental-

ly-friendly model than the current aircrafts in service. This will help

create a more pleasant environment for the community inhabi-

tants within the vicinity of an airport.

Payments of surcharge by domestic airports in 2016 (KRW 100 million)

합계

28.4

Gimpo airport

13.8

Jeju airport

7.2

Busan airport

6.9

Ulsan airport

0.3

Yeosu airport

0.2

-10

-15

-20

-25

-30

1990 1995 2000 2005 2010 2015 2020 2025

-5

0

Chapter 3

Chapter 4

747-400p

A330-300A330-200

737-800W(Winglet)

777-200

737-900 737-900ER

CS300

A321 neo

777-300ER777F

747-8F

A380-861787

777-300747-400F

747-400ERF

Noise level of Korean Air aircraft

Korean Air pays a noise surcharge for every flight according to the

regulations set by individual airports. The noise surcharge paid by

airlines is used to reduce aircraft noise and to support noise-affect-

ed areas in accordance with the designated agenda of the speci-

fied airport.

Korean Air’s aircraft operation regulations and Aircraft Model

Guidebooks stipulate noise-reducing flight procedures. All flight

operations at Korean Air follow these procedures to alleviate noise

from takeoff and landing. The compliance with internationally im-

posed airport noise-reduction procedures is accompanied by the

Noise Abatement Departure Procedure (NADP) and the Contin-

uous Descent Approach (CDA) of the ICAo adapted to different

needs.

NADP1 It is intended to provide noise reduction for noise-sensitive areas in close proximity to the departure end of the runway-in-use.

NADP2 It provides noise reduction to areas more distant from the runway end.

CDA

• Aircraft maintains a fixed descending speed until it reaches the final altitude upon approaching a runway

• This approach produces positive effects on flight safety in the approach phase.

• It is designed to reduce fuel consumption and noise compared to other conventional descents such as approaching an airport in a stair-step fashion.


66


Governance

BOARDING PASS

67

69

71Myanmar

Yellow fields at harvest

time, gold-painted

temple roofs and monks

in saffron robes.... In

Myanmar, a golden

country located on the

border between Southeast

Asia and the Indian

subcontinent, about 90%

of the people are Buddhists. The

spirit of the Buddhist traditions can be

felt in a mysterious cave temple in Hpa An

in southern Myanmar.

Photo by Zaw Zaw Tun in Hpa-An of Myanmar – Among selections during the 23rd Annual Korean Air Travel Photo Contest

67

Corporate Governance

Board of Directors Korean Air’s board of directors consists of four standing directors,

including the CEo, and six non-standing directors with proficiency

in different fields of academia, law, government and finance. out-

side directors are appointed by the general shareholders’ meeting

from the candidates nominated by the Non-Standing Director

Nomination Committee, the majority of which are composed of

non-standing directors. Some qualifying shareholders can recom-

mend a candidate for a non-standing director position provided

that he/she follows procedure. Information on the non-standing

directors and candidates are disclosed on the DART website in the

run-up to the general shareholders’ meeting.

Type Name Position/Career backgroundDate of appointment

Term (years) Note

Standing directors

Cho Yang-ho Chairman & CEo 2016.03.18 3Chairman of the board

Cho Won-tae President & Coo 2015.03.27 3 -

Woo Kee-hong Executive Vice President 2017.03.24 3 -

Lee Soo-keun Executive Vice President 2017.03.24 3 -

Non- standing directors

Kim Seung-yu Former CEo of Hana Financial Group 2015.03.27 3 -

Lee Yun-woo Chairman of Geoje Big Island Asset Management 2015.03.27 3Chief of the AuditCommittee

Kim Jae-il Professor of Seoul National University Business School 2016.03.18 3 -

Bahn Jang-shick Dean, Graduate School of Management of Technology, Sogang University 2015.03.27 3 -

Ahn Yong-seok Lawyer (Lee & Ko Law Firm) 2017.03.24 3 -

Jeong Jin-su Lawyer (Yoon & Yang Law Firm) 2017.03.24 3 -

Members of the board (As of Mar. 24, 2017)

Committees in the BODIn order to ensure efficient operation of the Board of Directors and

to comply with related laws and regulations, Korean Air has es-

tablished and operated four committees, namely the Audit Com-

mittee, Non-standing Director Nomination Committee, Affiliate

Transactions Committee, and Management Committee. Since all

members of the Audit Committee are non-standing directors, they

can independently monitor the performance of the directors' du-

ties and the company operations with senior executives in the fi-

nancial and auditing divisions attending to assist members as they

deliberate the agenda.

Name Members Name Purpose and Role

Non-standing Director Nomination Committee

Standing directors 2 Cho Yang-ho,Woo Kee-hongNominating non-standing director candidates according to governing laws, including the company’s Articles of Association and the Board of Directors Regulations

Non-standing directors 4

Kim Seung-yu, Kim Jae-il, Bahn Jang-shick,Jeong Jin-su

Audit Committee


Lee Yun-woo,Bahn Jang-shick,Jeong Jin-su

Auditing the account books and business operations while dealing with matters commissioned by the Board of Directors according to governing laws, including the Articles of Association and the Board of Directors Regulations

Management Committee

Standing directors 3 Cho Yang-ho, Cho Won-tae, Woo Kee-hong Making decisions pertaining to the agenda as commissioned by the Board of Directors and significant issues other than those subject to the resolution by the general shareholders’ meeting as stipulated in the relevant laws and the Articles of Association


Kim Seung-yu, Ahn Yong-seok, Jeong Jin-su

Affiliate Transactions Committee

Standing directors 1 Lee Soo-keun Performing previews of major inside transactions involving affiliated persons under the Fair Trade Act, and making suggestions for corrections to any transactional activity pointing out possible legal violations


Lee Yun-woo,Jeong Jin-su

Committee Information(As of Mar. 24, 2017)

68

Preventing conflict of interests within BOD Korean Air’s articles of association and BoD regulations stipulate

“directors with vested interests in any particular agenda are disqual-

ified from the voting rights on the item in question and are there-

fore unable to partake in the quorum at the meeting”. Members

of the board are notified of this rule prior to making a resolution.

Date Agenda

Attendance of non-standing directors

2016.2.2Five agenda including the FY2015 Account Settlement

5/5

2016.2.24Three agenda including the 54th Annual General Shareholders’ Meeting

5/5

2016.3.18Ten agenda including appointment (proposal) of CEo

6/6

2016.4.22Agenda on applying for voluntary agreement of Hanjin Shipping

5/6

2016.5.12Seven agenda including the first quarter of FY2016 Account Settlement

6/6

2016.7.21Four agenda including the first half of FY2016 Account Settlement

6/6

2016.9.8~9.10*

Agenda on loan to Hanjin Shipping 6/6

2016.9.18/9.21**

Two agenda including loan (proposal) to Hanjin Shipping

6/6

2016.11.3Two agenda including the third quarter of FY2016 Account Settlement

6/6

2016.12.13Five agenda including 2017 business plan (proposal)

5/6

2016 BOD Activities

* After the meeting was adjourned on Sept. 8-9, it was conditionally approved on Sept. 10 (on condition of securing collateral first).

** After the meeting was adjourned on Sept. 18, A resolution was made by BoD on Sept. 21 (replacing the resolution on Sept. 10).

Stakeholder communication channelsKorean Air makes use of various channels such as annual reports,

semi-annual and quarterly reports, postings of IR information on

the website, general shareholders’ meetings, IR sessions, and the

DART(https://dart.fss.or.kr) to swiftly establish communication on

major business issues of pertinence to stakeholders and share-

holders, and to receive stakeholder feedback. In particular, the

sustainability report is the major channel of communication with

stakeholders and is published with the approval of the president,

vice president and heads of divisions.

Decision-making hierarchy and socially responsible management The CEo and chairman of Korean Air concurrently holds the po-

sition of chairman of the board so as to deal with major business

issues more efficiently and is entrusted with the management of

all business matters, including economic, environmental and so-

cietal, to ensure the timeliness of decision-making. The high-level

council, a standing body composed of executives, who are heads

of key divisions or higher in position, makes decisions on strategic

business and sustainability management. This council functions as

an effective decision-making body by actively responding to the

expectations and demands of stakeholders on economic, environ-

mental, and social trends, and by reviewing and reaching a con-

sensus on issues from a company-wide perspective. The council

meets regularly to monitor and evaluate the resolution progress of

issues discussed at meetings.

BOD performance resultsKorean Air’s board of directors convened seven regular and six ex-

traordinary meetings to discuss and vote on 39 different agenda in

2016. The BoD holds regular meetings at least once every quarter

to ensure the informed discussion and review of major agenda and

convene extraordinary meetings whenever necessary. The annual

BoD meeting schedule is published in advance to ensure a higher

rate of attendance each year. In 2016, the average rate of atten-

dance stood at 92 percent (97 percent being non-standing direc-

tors), i.e. the meetings were attended by 9.2 directors on average.

Senior-level executives from each business divisions including Pas-

senger and Cargo Flights and Finance and Technology, may attend

the BoD meetings whenever deemed necessary in order to assist

the directors in informed decision-making. Executives in charge of

individual business areas also present relevant issues to the board

and answer questions pertaining to the agenda.

2014 2015 2016

Frequency of BoD meetings (times) 9 9 13

Number of approved agenda (items) 51 43 39

BoD participation rate (total) (%) 80 87 92

BoD participation rate

(non-standing directors) (%)89 90 97

BOD performance results

Corporate Governance

69

Risk management system

•Whistle blowing system•Compliance officer•Voluntary reporting on family members or relatives who work

for companies associated with or related to Korean Air

Ethics Management

Charter of Ethics and ethics management organizationKorean Air proclaimed its commitment to business ethics by an-

nouncing the incorporation of its Charter of Ethics in January 2001,

as the guiding principles in all business activities. Additionally, all

employees at Korean Air pledged to follow the underlying princi-

ples and values in their daily business activities. In addition to the

in-house ethics secretariat, the heads of each business division and

executive officers in charge are serving as chief ethics officers who

encourage and assist ranks-and-files with making rightful deci-

sion-making and behavior. Based on the Charter of Ethics, we have

developed business ethics programs for all employees to abide by,

including guidelines on the implementation of the code of ethics,

on dealing with ethics issues and the whistle blowing program.

Korean Air’s Charter of Ethics

Korean Air regards transparency and responsibility as core management values. We respect free market principles and abide

by relevant rules and regulations in our business practices. With these principles, we strive to promote prosperity for the company

and society as a whole. As a result, Korean Air institutes a Charter of Ethics, which we vow to observe at all times.

•We regard customer satisfaction and safety as our highest priority.

•We increase investment value for our investors.

•We respect all employees and their right to an enhanced quality of life.

•We promote joint development with our business partners based on mutual trust.

•We respect the principles of free competition and maintain front-runner status in the development of the airline transport industry.

•We contribute strongly to the development of society and to the preservation of the environment.

•We acknowledge the corporate principles set forth by the company and uphold all obligations and responsibilities.

Guidelines on Code of Ethics’ implementation

•Setting forth principles on

how to make the right value

judgments and demonstrate

proper behavior

Guidelines on dealing with ethics issues

• Providing specific guidelines and clear standards on how to respond to problems

70

Fair transactions and legal compliance Korean Air has been running the Compliance Program and signed

up to the ‘Fair Trade and Shared Growth Agreement” with business

partners in the aircraft manufacturing industry as recommended by

the Fair Trade Commission. Committed to establishing fair transac-

tion practices within the organization, we have also adopted the

Fair Trade Commission’s Four-Action Plan while operating the Unfair

Transactions Report Center in the promoting of self-compliance.

Raising ethical awarenessWe provide detailed guidelines on business ethics on our intranet

through the exclusive bulletin board. All our executives and employ-

ees are mandated to complete business ethics training on a regu-

lar basis via the internal learning network and submit a pledge of

ethics upon completion of each course. This helps keep everyone

well-versed in the importance of ethical management practice as a

strategy for sustainable growth and remind them the importance of

having an ethics code to begin with.

Whistle blowing procedureThe whistleblowing procedure has been in place to eradicate per-

sonal and business favors requested and/or provided by employ-

ees, illegal acts, corruption and other irregularities that often arise

in deals involving suppliers. Anyone can report any of the above

via e-mail at jebo@koreanair. com. All received reports go through

fact-finding investigations for appropriate measures to determine

appropriate punishments or corrective action. Reporters are strictly

protected according to the internal rules and procedures, and are

kept up to date with the progress of the investigation.

Course 2014 2015 2016

Compliance with anti-trust laws 2,778 928 1,110

Sexual harassment-free workplace 18,339 18,286 19,234

Ethics management in Korean Air 19,202 928 17,558

Compliance officer program 1,027 18,084 17,038

Understanding of Improper Solicitation and Graft Act - - 18,056

Ethics management training performance(persons)

1. Training performance is the sum of those have completed the course.2. ‘Ethics management in Korean Air’ is provided biennially (domestic/overseas).3. ‘Understanding of Improper Solicitation and Graft Act’ was launched in Aug. 2016.

Ethics Management

71

Risk Management

Financial Risks

Exchange rate riskKorean Air conducts transactions in foreign

currencies and is exposed to risks arising from exchange rate vol-

atility. To manage these risks, we strive to maintain a balance be-

tween revenue and expenses per currency while making use of

currency swaps within the limits set by policy.

Interest rate riskKorean Air borrows funds at fixed and variable

interest rates, which exposes the company to interest rate risks. In

this regard, we maintain an optimal ratio between fixed-rate bor-

rowing and floating-rate borrowing and enter into interest rate

swaps. Risk aversion activities are regularly assessed to adjust in-

terest rate trends and define the risk profile appropriately, ensuring

that an optimal hedging strategy is applied.

Oil price riskMarket prices for petroleum products such as jet

fuel change with various factors influencing supply and demand

of the global oil market. These factors also impact the sales perfor-

mance and cash flow of the air transportation business, our largest

business segment. To respond to oil price risks, oil option contracts

are utilized in accordance with internal policies.

Non-financial Risks

Strategic/Operational risk We have in place the Communication

Plaza to promote active communication and suggestions about

how to avoid risks originating from inadequate decision-making

and changes in the business environment. Regular internal audits

also evaluate the potential for risk per department while also audit-

ing the efficiency the deployment of corporate resources.

Regulatory riskA regular monitoring system is in place to ensure

compliance with laws and regulations, and a considerable portion

of our resources, including the legal department and in-house le-

gal experts, are allocated to proactively manage regulatory risks.

We also have the Compliance Program as a means to prevent the

risk of unlawful transaction.

Event risk The Corporate Safety, Security & Compliance was set up

under the direct control of the president to ensure integrated and

effective management of all safety and security matters in prevent-

ing aircraft accidents, hijacking and other accidents while minimizing

losses. Regulations, guidelines and manuals pertaining to accident re-

sponse are available. The emergency response system is additionally

evaluated periodically along with company-wide drills and training.

Environmental risk In a bid to counter climate change and envi-

ronmental accident risks, we have devised bylaws on company-wide

environmental risk prevention and environmental accident response

while developing short-cut routes and adopting high fuel-efficiency

aircrafts to minimize negative impact on the environment.

Crisis Management Korean Air has identified risk factors that affect the company and

established internal rules and guidelines for the organization, its

mission and the emergency measures required to cope with cri-

ses, based upon which all employees can respond in a systematic

manner that minimizes economic loss, damages on the corporate

image and disturbances within the company.

Identifying risks

Producing adequate countermeasures

Continuous monitoring

Monitoring changes in the business environment

Responding to risks by function/

team

72Photo by Lee Gwang-jin in the Lake Khubsgul of Mogolia – Among selections during the 21st Annual Korean Air Travel Photo Contest


Appendix

BOARDING PASS

Mongolia is the birthplace of Chinggis Khan, who

built the Mongolian Empire into the largest in history

in the early 13th century. This landlocked Central Asia

country is known for its pristine nature, including vast

green steppes, a starry night sky, and crystal-clear

lakes. Lake Khubsgul, also called the Mother Sea, can

appear more like a sea than a lake due to its vastness.

Mongolia

73

80

82

87

88

73

Key Sustainability Indicators

2014 2015 2016

Sales

Sales 11,680,398 11,308,423 11,502,877

Cost of sales 10,171,068 9,286,479 9,218,012

Gross profit 1,509,330 2,021,944 2,284,865

Selling and administrative expenses 1,136,822 1,162,726 1,205,861

operating profit (loss) 372,508 859,218 1,079,004

Non-operating operating profit and loss -914,597 -1,358,198 -1,821,094

Net profit (loss) before tax -542,089 -498,980 -742,090

Tax expense (profit) -181,513 -91,298 -150,729

Net profit (loss) -360,576 -407,682 -591,361

Assets

Current assets 2,392,892 2,873,563 2,875,642

Non-current assets 19,027,555 20,175,377 19,830,397

Total assets 21,420,447 23,048,940 22,706,038

Current Liabilities 6,350,693 8,428,114 8,269,323

Non-current liabilities 13,090,042 12,324,532 12,783,569

Total liabilities 19,440,735 20,752,646 21,052,892

Capital stock 298,931 369,753 369,753

other paid-in capital 11,248 776,179 1,153,265

other capital components 206,894 332,917 327,977

Retained Earnings 1,462,639 817,445 -197,849

Total capital 1,979,712 2,296,294 1,653,146

Total liabilities and equity 21,420,447 23,048,940 22,706,038

Economic Performance (million won)

74


unit 2014 2015 2016

Employees

Total employees persons 20,428 20,815 20,844

Gender Male persons 11,719 11,737 11,655

Female persons 8,709 9,078 9,189

Age Below 30 persons 4,865 5,071 4,761

30~39 persons 6,475 6,539 6,617

40~49 persons 6,243 6,183 6,141

50 and above persons 2,845 3,022 3,325

Region Domestic persons 18,232 18,481 18,620

overseas persons 2,196 2,334 2,224

Permanent Male persons 10,961 10,990 10,956


Non-permanent Male persons 758 747 699


Administrative positions

Male persons 2,750 2,722 2,798

Female persons 975 1,104 1,294

General positions Male persons 8,211 8,268 8,158


Domestic employees Male persons 10,784 10,790 10,731


overseas employees Male persons 935 947 924


Social Performance

75

Social Performanceunit 2014 2015 2016

New Employment and Turnover

New employment Male persons 573 504 438

Female persons 848 1,012 690

Below 30 persons 1,146 1,264 900

30~39 persons 241 194 205

40~49 persons 24 41 16

50 and above persons 10 17 7

Domestic persons 975 1,037 813

overseas persons 446 479 315

Turnover Male persons 551 550 503

Female persons 555 574 674

Below 30 persons 411 366 411

30~39 persons 325 336 386

40~49 persons 99 143 201

50 and above persons 271 249 179

Domestic persons 743 789 767

overseas persons 363 335 410

Recruitment from Local Communities

Local employment No. of overseas employees persons 2,459 2,599 2,449

Ratio of locals % 89.3 89.8 90.8

Ratio of locals in manager positions % 13.9 13.0 13.7



76

unit 2014 2015 2016

Maternity Protection

Use of the maternity protectionsystem

Maternity leave before and after child birth case 702 856 682

Rate of return to work after the maternity leave % 100 100 100

Pregnancy leave persons 403 463 446

Childcare leave persons 670 735 670

Rate of retention for one year after returning to work from childcare leave

% 78.6 81.5 84

Ratio of male employees % 2.1 3.3 4.3

Employee Education

Training performance No. of employees who took education programs persons 20,428 20,815 20,844

No. of hours per person hour 114 103 89

Lifelong learning support Scholarships for graduate school to employees persons 189 152 140

Social Contribution

Social Contribution Volunteering hours per person hour 1.9 1.7 1.9

Social contribution expenses million won 9,679 12,562 9,227

Information Security

Corporation information security education

Domestic persons 14,686 24,843 24,646

overseas persons 1,255 5,921 5,819

Customers’ personal data Personal data leak case 0 0 0


Social Performance

77

Environment Performanceunit 2014 2015 2016

Fuels and Energy

Fuel consumption for air transportation

Jet oil tons 4,006,984 4,083,989 4,174,377

Ground operations B-C oil GJ 174,124 -* -

Direct energy consumption

B-B oil GJ - - -

Gas/Diesel oil GJ 245,097 122,781** 114,988

Boiler kerosene GJ - - -

By product fuel No. 1 GJ 9,675 8,464 14,939

By product fuel No. 2 GJ 82,427 256,037*** 276,276

Gasoline GJ 10,509 11,072 11,114

Jet oil GJ 33,157 29,715 22,471

LNG GJ 241,459 246,072 260,097

LPG GJ 3,786 5,676 6,246

Ground operations Electricity GJ 1,267,959 1,295,423 1,320,069

Indirect energy consumption

Medium-temperature water (steam) GJ 25,152 24,077 28,435

Energy Intensity Air transportation MJ/RTK 12.26 12.28 12.36

Ground operations GJ/sales amount:1 billion won

179.22 176.8 178.62

GHG emissions

GHG emissions from air transportation

Scope1 tCo2eq 12,750,860 12,995,052 13,283,086

GHG emissions from ground operations

Scope1 tCo2eq 54,201 43,650 45,309

Scope2 tCo2eq 62,738 63,694 65,379

GHG emissions intensity Air transportation kg_Co2e/100RTK 85.56 91.29 91.85

Ground operations ton_Co2e/1 billion won

10.01 9.52 9.68

* No consumption starting from 2015** Consumption drastically dropped after the transfer of

the Limousine operation.*** Consumption amount increased as the Tech Center

fuel changed from B-C to C-9


78


GHG emissions reduction

Greenhouse gas reduction

Economic flight tCo2 141,168 143,019 149,606

Performance enhancement tCo2 97,793 93,346 56,628

Flight planning tCo2 168,039 181,159 179,332

Weight management tCo2 24,873 28,266* 28,047

Water Resources

Water use Total water intake tons 1,300,020 1,407,453 1,475,831

Recycled amount tons 19,390 22,450 25,117

Recycling rate % 1.49 1.6 1.7

Water discharge BoD tons 42.293 52.832 47.157

CoD tons 25.643 27.725 14.929

SS tons 34.691 40.95 16.768

T-N tons 4.05 4.025 2.213

T-P tons 1.041 0.933 0.616

Air

Air emissions Dust tons 27 23 16

THC tons 29 30 32

Nox tons 67,190 68,543 70,155

Sox tons 11.2 4.6 6.7

So2 tons 3,987 4,063 4,152* Data errors are corrected after re-validation.


79


Waste

Waste generation Municipal tons 23,825 24,253 25,792

Discharge tons 1,032 995 875

Designated tons 602 771 811

Waste disposal Incineration tons 14,357 15,128 16,600

Landfill tons 621 474 326

Recycling tons 10,481 10,417 10,552

Environmental education

Environmental education

Basic training man-hour 3,398 3,652 3,032

Job skill training man-hour 890 1,434 1,256

Practical training man-hour 2,954 2,610 3,296


80

Third-Party Assurance Statement

To the Stakeholders of Korean Air

The Korea Productivity Center (hereinafter ‘the Assurer’) was requested

by Korean Air to perform a third-party assurance of 2017 Korean air Sus-

tainability Report (hereinafter ‘the Report’), and provides the following

assurance statement.

Responsibility and Independence

Korean Air is entirely responsible for all information and opinions pre-

sented in the Report. The Assurer is solely responsible for providing a

third party verification of the contents of the Report. As an independent

assurance agency, the Assurer neither was involved in the process of de-

veloping the Report with Korean Air, nor is in any conflict of interest that

may undermine our independence.

Assurance Standards

The assurance was performed in accordance with the Assurance Type 1

and Moderate Level based on the AA1000AS (2008). The Assurer also veri-

fied the compatibility of the Report to the Principles of Inclusivity, Materi-

ality, and Responsiveness according to the AA1000APS (2008) and to the

GRI G4 Guideline. Moreover, the Assurer checked whether Korean Air com-

plied with Global Reporting Initiatives (GRI) G4 Guideline and ISo26000.

Limitations

The assurer conducted an assurance of Korean Air’s performance in 2016

in accordance with the standards above, and does not include the verifi-

cation of the reliability of the financial performance, GHG emissions and

information on ERP system and so on. Moreover, the on-site inspection

was limited to the headquarters in Seoul, and any further assurance pro-

cedure may change the result accordingly.

Methodology

The independent assurance of the Report was conducted following the methods below:

1. Verified whether the Report fulfilled the requirements of GRI G4 Guidelines’ Core option’.

2. Verified whether the Report was in compliance with the principles dictating the reporting contents and quality based on GRI G4 Guidelines.

3. Verified objectivity and appropriateness of all selected key issues and content in the Report by reviewing various analysis.

4. Verified the suitability of the reporting contents and errors in expression through the comparative analysis with other sources.

5. Verified the evidence of key data and information along with the internal process and system through the on-site inspection at the headquarters in

Seoul.

Findings

The Assurer verified that the Report fairly and accurately displayed Korean Air’s sustainability management activities and performances. Furthermore, it

is verified that the Report fulfilled requirements of GRI G4 Guideline’s Core option. In addition, the Assurer verified the Core option requirements for the

GRI G4 Guidelines General Standard Disclosures, and reviewed all specific standard disclosures of material issues against the disclosure on management

approach(DMA) and indicators as identified from the process of determining report content as follows:

Contents Material Aspect DMA & Indicators

Strengthening aviation safety

and security occupational Health and Safety DMA, LA5, LA6, LA7, LA8

Customer Health and Safety DMA, PR1, PR2

Responding to

new climate regimesEnergy DMA, EN3, EN4, EN5, EN6, EN7

Emissions DMA, EN15, EN16, EN18, EN19, EN20, EN21

Providing

customer-oriented serviceCustomer Health and Safety DMA, PR1, PR2

Product and Service Labeling DMA, PR5

Customer Privacy DMA, RR8

Creating shared value

with societyIndirect Economic Impacts DMA, EC7, EC8

Local Communities DMA, EC8, So1

81

Inclusivity: Stakeholder Engagement

The Principle of Inclusivity refers to the principle that an organization

is ought to involve stakeholders in the process of developing and ac-

complishing responsible, strategic response measures to sustainability.

The Assurer confirmed that Korean Air put various efforts to comply with

and improve the Principle of Inclusivity. Korean Air categorizes its major

stakeholders into 7 groups: customers, employees, partner companies,

local communities, government, shareholders and labor unions. Korean

Air maintains organic relations with its stakeholders and actively oper-

ates communication channels for each group.

Materiality: Identification and Reporting of Material Issues

The Principle of Materiality refers to the principle that an organization

should identify material issues that are related to relevant stakeholders

of the organization. The Assurer could verify that Korean Air selected is-

sues that are significant and important to its stakeholders. Korean Air

attempted to identify key issues in its sustainability aspect through di-

verse methods including global initiatives, media analysis, stakeholder

communication, business principles, and benchmarks. It also showed

its efforts for continuously managing and improving the key issues by

offering exclusive departments in charge, performance in 2016, future

plans and goals specifically. Furthermore, the Assurer could confirm that

the key issues are evenly reflected and reported throughout the Report.

Responsiveness: Organization's Responsiveness to Issues

The Principle of Responsiveness means that an organization must respond to the issues that may have effect on the performance of its stakeholders.

The Assurer verified that Korean Air identified major expectations that are influential to stakeholders’ performance, took corresponding measures, and

properly presented them in the Report. Especially, Korean Air’s efforts toward enhancing safety by operating SMS (Safety Management System) and IOSA

(IATA Operational Safety Audit) etc. in order to ensure safety on flight is recognized as an outstanding practice.

Recommendations

Upon highly valuing Korean Air’s various actions and performance to enhance its sustainability, the Assurer proposes below for continuous growth in

future report publications and sustainability standard.

1. Korean Air operates a communication channel to the characteristics of its stakeholders and actively promotes its response activities. In order to more

systematically manage the major discussions and issues raised by stakeholders, we recommend that Korean Air established a stakeholder engagement

policy that can manage key issues and strengthen the management reporting system.

2. In order to improve the quality of management and to ensure continuous management, Korean Air has to report on key activities, data trends and

future goals from a long-term perspective. In addition, we recommend that you continually review performance and goals (KPIs) through a manage-

ment system.

Aug 2017

Korea Productivity Center CEO Hong, Sun-Jik

Director Kim, Dong-Soo Team manager Lee, Yang-Ho Researcher Jeong, Ae-Jin

The Sustainable Management Center of Korea Productivity Center is an assurance agency certified by AccountAbility, an institution that establishes global international standards AA1000 for stakeholder participation and verifications, thereby qualified to conduct assurance on an independent basis. Moreover, our Assurance Committee is consisted of competent experts, who have ample experiences in sustainability management consulting and assurance and have completed relevant professional training.

* AA1000AS(2008): AA1000 Assurance Standard(2008) is an international assurance standard, set by AccountAbility, that provides method of reporting sustainability management issues by evaluating the organization management on performances, compliance with principles, and reliability of performance information

* AA1000APS(2008): AA1000 AccountAbility Principles Standard(2008) is an international assurance standard set by AccountAbility that provides principles of AA1000 standards.

000-81

Third-Party Assurance Statement

82

GRI G4 Index

GENERAL STANDARD DISCLOuSuRES Page(s) Material issue

Strategy and Analysis

G4-1 Statement from the most senior decision maker of the organization (e.g., CEo, chair, or equivalent senior position) regarding the relevance of sustainability to the organization and its strategy for addressing sustainability

5

G4-2 Description of major impacts, risks and opportunities 19,23,31,35

Organizational Profile

G4-3 Name of organization 6

G4-4 Primary brands, products, and services 6

G4-5 Location of the organization’s headquarters 6

G4-6 Number of countries where the organization operates and names of countries where the organization has major operations or which are specifically relevant to the sustainability topics covered in the report

7

G4-7 Nature of ownership and legal form 6

G4-8 Markets served (including geographic breakdown, sectors served, and types of customers and beneficiaries 7

G4-9 Scale of the organization 6,44,45

- Total number of employees 6,44,45

- Total number of operations 6,44,45

- Net sales (private company) or net profit (public company) 6,44,45

- Total capitalization broken down in terms of debt and equity (private company) 6,44,45

- Quantity of products or services provided 6,44,45

G4-10 a. Total number of employees by employment contract and gender 74,75

b. Total number of permanent employees by employment type and gender 74,75

c. Total workforce consisting of employees and supervised workers by gender 74,75

d. Total workforce by region and gender 74,75

e. Clarification of the substantial portion of the organization’s work being performed by workers legally recognized as self-employed or by individuals other than employees or supervised workers, including employees and supervised employees of contractors

74,75

f. Any significant variation in employment numbers 74,75

G4-11 Percentage of total employees covered by collective bargaining agreements 76

83

GRI G4 Index


Organizational Profile

G4-12 Description of the organization’s supply chain 60

G4-13 Any significant change during the reporting period regarding the organization’s size, structure, ownership, or supply chain No significant changes

G4-14 Clarification of precautionary approach or principle being addressed by the organization 71

G4-15 List of externally developed economic, environmental, and social charters, principles, or other initiatives to which the organization subscribes or which it endorses

11,86

G4-16 List of memberships in associations (such as industry associations) and national or international advocacy organizations 88

Identified Material Aspects and Boundaries

G4-17 a. List of all entities included in the organization’s consolidated financial statements or equivalent documents 2

b. Clarification of inclusion of any entity in the organization’s consolidated financial statements or equivalent documents not covered in the report 2

G4-18 a. Process of defining the report content and aspect boundaries 12

b. Explanation on how the organization has implemented the Reporting Principles for Defining Report Content 12

G4-19 List of all material aspects identified in the process of defining the report content 12

G4-20 For each material Aspect, the Aspect Boundaries within the organization are as follows 12, 19, 23, 31, 35

* Clarification of the relevancy of the Aspect material within the organization 12, 19, 23, 31, 35

* If Aspect is not material for all entities within the organization (as described in G4-17), select one of the following two approaches and report one of them:

12, 19, 23, 31, 35

- G4-17 List of entities or groups of entities included in G4-17 for which Aspect is not material 12, 19, 23, 31, 35

- G4-17 List of entities or groups of entities included in G4-17 for which Aspects are material 12, 19, 23, 31, 35

* Any specific limitation regarding Aspect Boundary outside the organization 12, 19, 23, 31, 35

G4-21 For each material Aspect, the Aspect Boundary outside the organization is as follows 12, 19, 23, 31, 35

* Clarification of relevancy of the Aspect material outside of the organization 12, 19, 23, 31, 35

* If Aspect is material outside of the organization, identify entities, groups of entities, or elements for which Aspect is material and describe the geographical location where Aspect is material for the entities identified

12, 19, 23, 31, 35

* Any specific limitation regarding Aspect Boundary outside the organization 12, 19, 23, 31, 35

G4-22 Effect of any reiteration of information provided in previous reports and reasons for such reiteration Specified on the corresponding page

84


Economic

G4-22 Effect of any reiteration of information provided in previous reports and reasons for such reiteration Specified on the corresponding page

G4-23 Significant changes from previous reporting periods in the Scope and Aspect Boundaries No significant changes

G4-24 List of stakeholder groups engaged by the organization 13

G4-25 Basis for the identification and selection of stakeholders to engage 13

G4-26 organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group 13

G4-27 Key topics and concerns that have been raised through stakeholder engagement as well as the organization’s response; report stakeholder groups raising each key topic and concern 13

Report Profile

G4-28 Reporting period for the information provided 1

G4-29 Date of the most recent previous report 1

G4-30 Reporting cycle 1

G4-31 Provide a contact point for questions regarding the report or its contents 1

G4-32 a. “In accordance” option chosen by the organization 80

b. Report GRI Content Index for the chosen option 80

c. Report reference to the External Assurance Report (if the report has been externally assured) 80

G4-33 a. The organization’s policy and current practice with regard to seeking external assurance for the report 80

b. If not included in the assurance report accompanying the sustainability report, report the scope and basis of any external assurance 80

c. Relationship between the organization and assurance providers 80

d. Clarification of involvement of the highest governance body or senior executives in seeking assurance for the organization’s sustainability report 80

Governance

G4-34 Governance structure of the organization, including committees of the highest governance body Identify committees responsible for decision making regarding the economic, environmental, and social impacts 67

Ethics and Integrity

G4-56 The organization’s code of conduct and code of ethics 69

GRI G4 Index

85

SPECIFIC STANDARD DISCLOuSuRES Page(s) Material issue

Material Aspect DMA and Indicators

Economic

EconomicPerformance

G4-EC1 Direct economic value generated and distributed 45

G4-EC2 Financial implications and other risks and opportunities for the organization’s activities due to climate change 23,62,63

G4-EC3 Coverage of the organization’s defined benefit plan obligations 55

Market Position G4-EC6 Proportion of senior management hired from the local community at major locations of operation 75

Market Position G4-EC7 Development and impact of infrastructure investments and services supported 35~42

G4-EC8 Significant indirect economic impacts, including extent of impacts 45

Environmental

Energy G4-EN3 Energy consumption within the organization 77

G4-EN4 Energy consumption outside of the organization 77

G4-EN5 Energy intensity 77

G4-EN6 Reduction of energy consumption 28~30

G4-EN7 Reductions in the energy requirements of products and services 28~30

Emissions G4-EN15 Direct greenhouse gas (GHG) emissions (SCoPE 1) 77

G4-EN16 Indirect greenhouse gas emissions (SCoPE 2) 77

G4-EN18 Unit of greenhouse gas emissions 77

G4-EN19 Reduction of greenhouse gas emission 78

G4-EN20 ozon depleting substances (oDS) emissions 78

G4-EN21 Nox, Sox, and other significant air emissions 78

Social

Labor Practices and Labor Rights

Employment G4-LA1 Total number and rates of new employee hires and employee turnover by age group, gender, and region 75

G4-LA2 Benefits provided to full-time employees not provided to temporary or part-timeemployees according to the major locations of operation

54,55,76

GRI G4 Index

86

SPECIFIC STANDARD DISCLOuSuRES Page(s) Material issue

Material Aspect DMA and Indicators

Social

Labor Practices and Labor Rights

Employment G4-LA3 Return to work and retention rates according to maternal or paternal leave 76

Labor- Management Relations

G4-LA4 Minimum notification period for significant changes to business (includingclarification of inclusion in the collective bargaining agreement)

50 days for layoff, and 30 days for dismissal

When changes in business operations occur.

occupational Health andSafety

G4-LA5 Percentage of total workforce represented in formal joint management–worker health and safety committees that help monitor and advise on occupational health and safety programs

21

G4-LA6 Type of injury and rates of injury, occupational diseases, lost days, and absenteeism;total number of work-related fatalities by region and by gender

19

G4-LA7 Workers with high incidence or high risk of diseases related to their occupation 53,54

G4-LA8 Health and safety topics covered in formal agreements with trade unions 53,54

Social

Local Communities

G4-So1 Percentage of operations with implemented local community engagement,impact assessments, and development programs

33~42

Anti-Corruption G4-So4 Communication and training on anti-corruption policies and procedures 70

G4-So5 Confirmed incidents of corruption and actions taken No cases of legal violations or fines

Product Responsibility

Customer Health & Safety

G4-PR1 Percentage of significant product and service categories for which health and safety impacts are assessed for improvement

21

G4-PR2 Total number of incidents of noncompliance with regulations and voluntary codes concerning the health and safety impacts of products and services during their life cycle by type of outcomes (treatment of violations)

No cases of legal violations or fines

Product and Service Labeling

G4-PR5 Results of surveys measuring customer satisfaction57

Customer Privacy G4-PR8 Total number of substantiated complaints regarding breach of customer privacyand loss of customer data

34,76

GRI G4 Index

87

Area Principles Page(s)

Human Rights 1. We support and respect the protection of internationally proclaimed human rights69~70

2. We make sure that we are not complicit in human rights abuse

Lobor 3. We uphold the freedom of association and effective recognition of the right to collective bargaining

49~554. We uphold the elimination of all forms of forced and compulsory labor

5. We uphold the effective abolition of child labor

6. We uphold the elimination of discrimination in employment and occupation

Environment 7. We support a precautionary approach to environmental challenges

23~30,

61~658. We undertake initiatives to promote greater environmental responsibility

9. We encourage the development and diffusion of environment friendly technologies

Anti-Corruption 10. We work against corruption in all its forms, including extortion and bribery 69~70

UN Global Compact

The UN Global Compact is an international agreement initiated by the United Nations that calls on companies to align strategies and operations with ten principles

on human rights, labor, the environment and anti-corruption efforts. Korean Air joined the program in support of these principles in July 2007, and will continue to

work on their implementation.

88

2016 Awards Organization Date

ToP 10 Airlines National Geographic Traveler 2016.01.21

Best International Airlines for Business Travel Travel & Leisure 2016.01.21

Safety Achievement Award Korea occupational Safety & Health Agency 2016.03.15

Readers’ Choice Best Airlines Conde Nast Traveler 2016.04.01

Gold Medal in the 2016 Buryatia Tourism Expo Ministry of Economy of the Republic of

Buryatia 2016.04.23

Ranked 1st in the air passenger transport service category of the Global

Customer Satisfaction Index (GCSI)Global Management Association 2016.06.23

Grand prize in the 2016 Travel Agent Friendly Airline Award Korea Association of Travel Agents (KATA) 2016.06.28

2016 Social Contribution Corporate Awards (environment and disaster relief category) The Korea Economic Daily 2016.07.12

Most Popular Airlines 21st Century Business Herald 2016.09.02

Russian Business Travel & MICE Award -Best Airline for Business Travelers 1 Business Travel 2016.09.29

2016 Best Transfer Service TRAVEL+ 2016.10.26

Grand prize in the integrated media category and silver prize in the radio category

in the 2016 Korea Advertising Awards

Korea Federation of Advertising Associations

(KFAA)2016.11.23

Silver prize in the 2016 AEo Best Practice Competition Korea Customs Service 2016.11.29

USD 700 million Export Tower Award Korea International Trade Association (KITA) 2016.12.05

Top 4 Foreign Airlines selected by Chinese GLoBAL TIMES 2016.12.13

CSR Creative and Innovative Company Award Embassy of the Republic of Korea in China 2016.12.16

SVo Awards Sheremeteyvo Airport 2016.12.19

2016 Excellent Foreign Ground Handlers of Xiamen Airlines Xiamen Airlines 2016.12.21

Major Awards and Memberships

89

Major Awards and Memberships

Category Associations and Organizations

Aviation IATA(International Air Transport Association) AAPA(Association of Asia Pacific Airlines) Sky Team, Korea Civil Aviation

Development Association (KADA) Federation of Korea Aeronautics, Korea Aeronautical Engineers Association, Korean Society for

Aeronautical & Space Sciences, Korean Association of Air and Space Law, Aviation Management Society of Korea

Economy Federation of Korean Industries, Korea Economic Research Institute, Korea Employers Federation, Korea Chamber of Commerce

and Industry, Federation of Economic organizations, Korea-Japan Economic Association, Korea Listed Companies Association,

Korea Exchange, Korea Customs Logistics Association, International Management Institute of the Federation of Korean

Industries, Korea International Trade Association, Korea-US Economic Council

Environment Green Companies Council, Business Council for Green Growth, Gangseo Business Group for Environmental Practices,

Voluntary Agreement of the Aviation Industry on GHG Reductions

Society Nanum Korea, Korean Council on the Protection of Personal Information, Korea Forum for Progress, Asia Society Korea

Center, Korea-Mongolia Forum, US Tourism Promotion Council, Seoul International Forum, Korea Mecenat Association, Korea

Management Association, Takamadonomiya Memorial Foundation, Korea Support Committee for the International Vaccine

Institute

260 Haneul-gil, Gangseo-gu, Seoul, Korea / Postal code: 07505 Tel +82-2-2656-7114