sustaining excellence - korean air · sustaining excellence korean air 04 company profile korean...
TRANSCRIPT
SUSTAINING EXCELLENCE2014 Korean Air Sustainability Report
20
14 K
OR
EA
N A
IR S
US
TA
INA
BIL
ITY
RE
PO
RT
ABOUT THIS REPORT
The Korean Air sustainability report is published yearly and this is the ninth issue since its first
publication in 2006. It was prepared in accordance with the GRI G4 Guidelines, covering the
company’s sustainability management strategies and accomplishments economically, socially
and environmentally. Verified credibility of data and information contained in the report was
provided by a third party assurer, whose report is included. Korean and English publications are
available at our corporate website: www.koreanair.com.
Reporting Guidelines
- In accordance with the ‘Comprehensive’ option of the GRI (Global Reporting Initiative) G4
Guidelines
- The contents were structured to cover the material issues as identified in the 2014
materiality analysis results
Reporting Period
- January through December 2013 (partially obtained from 1H 2014 performance)
- Qualitative data collected over past three years (2011-2013) for trend analysis
Reporting Scope
- All business premises of Korean Air, including its head office as well as its domestic and
overseas branches (data related to its subsidiaries or affiliates are not included in this
edition as they had little impact on business activities of Korean Air.
Report Assurance
- GRI G4 and AA1000AS standards (assured by Korean Standards Association)
Significant Changes from the Previous Report
- On August 1, 2013, Hanjin KAL was established through equity spin-off of the former Invest-
ment Project Division.
Additional Information
Korean Air’s corporate website: (www.koreanair.com)
Korea’s Financial Supervisory Service’s electronic disclosure system: (http://dart.fss.or.kr)
Contact Information
Korean Air Environment Team (Environment and Construction Management Department)
[email protected] / Tel. +82-2-2656-5512
CONTENTS
02 Letter from the CEO
04 Company Profile
08 Routes
10 Vision and Business Philosophy
12 Governance
14 Business Ethic
16 Crisis Management
18 Materiality Test
20 Value Created from Korean Air’s Business Activities
22 Growth for Excellence
30 People for Excellence
42 Greening for Excellence
56 Value for Excellence
66 Harmony for Excellence
76 Appendix
77 UN Global Compact
78 Awards and Associations
79 GRI Index
85 Third Party Assurance Statement
The Centennial
Since the first, historical scheduled commercial airline flight in the world that flew 30 km from St. Petersburg Port to Tampa Bay on January
1, 1914, the global airline industry has developed far beyond expectations over the past century and has become an essential part of
world industry and global cultural exchange. Whether it is bringing together Seoul and New York or Mumbai and Cape Town, the airline
industry has closed both the geographical and psychological gaps between people from all corners of the globe.
Now, can you imagine another 100 years from now and the kind of further advances in travelling and cargo transport that could bring
about even more change to our lives? Amidst these changes, what kind of role would the aviation industry contribute?
Join us in taking a glimpse at a world Korean Air appreciates as much as it understands when it comes to a sustainable future
economically, socially and environmentally.
LETTER FROM THE CEO
KOREAN AIR SUSTAINING EXCELLENCE
02
We will then embrace innovation and a bettered functioning model to build
a more flexible and dynamic organizational structure. While maintaining a
scope on market movements and trends to stay ahead, we will further im-
prove our customer service framework to enable a flexible and prompt re-
sponse to customer needs.
We will continue endeavors towards ‘optimal flight scheduling’ based on im-
proved efficiency in our mobilization of not only the fleet but all resources
available. According to our fleet modernization plan, we anticipate the recep-
tion of seven new high-efficient aircrafts, comprising of five passenger air-
planes including the two A380s and two cargo aircrafts, B747-8F and B777F,
and have readied for the disposal of old planes, the B747-400 passenger
plane and A300-600 cargo aircraft. Our first scheduled routes to Houston,
U.S.A., will be the first step in our multi sector advancement with high growth
potential around the world, equipping us with profitable routes.
Our 45th anniversary serves a significant marking point to go back to our
roots under the founding philosophy: “national contribution through trans-
portation.” It specifically implicates that of corporate social responsibility and
its national obligation. Korean Air was founded upon this philosophy and we
will renew our commitment to fulfilling our social and national responsibility
through a meaningful and successful transportation industry.
On the global front, as a member of the UN Global Compact, Korean Air will
continue to comply with the ten-point principle including human rights, labor,
environment and anti-corruption, while partaking in causes for the less-priv-
ileged to fulfill our role as a respected and admired corporate citizen.
Over a 100 year-history, the commercial airlines industry has established
itself as an industry of infinite growth potential linking the globe together. As
the airplane has enabled the achievement of man’s long-cherished dream of
being able to fly, Korean Air will also continue its journey towards achieving
the dream of a better future for all.
We look forward to your joining us on this journey.
Thank you.
Dear stakeholders,
I would like to first express my heartfelt appreciation for your
continued support and encouragement in Korean Air. As a lead-
ing global carrier, Korean Air has emerged as a top link in the
industry with continued support and partnerships among vast
backgrounds.
As we publish the ninth issue of our sustainability report, we
made absolutely sure that it explicitly and implicitly communi-
cated the company’s endeavors towards balanced sustainability
in all the triple bottom-lines with our stakeholders.
Looking back on 2013, the aviation industry faced a great deal of challenges
due to the delayed global economic recovery, unstable political developments
on the Korean peninsula, skyrocketing oil prices and the Won’s appreciation
against Yen. These challenges, however, catalyzed Korean Air to strive for
a consolidated growth of its foundation in various areas under the motto of
“co-prosperity.” This encouraged a concentrated focus on not only internal
but outbound cooperation.
Its close partnership with Czech Airlines (CSA) helped Korean Air bolster its
competitive edge in the European market, while the new non-stop routes
to Colombo, Sri Lanka, and Male, Maldives, further promoted an expansion
of its Asian network. Furthermore, our customer service was upgraded with
state-of-the-art aircraft fleets, the A380 and B747-8F, bringing about an
enhancement of fuel efficiency and cost competitiveness in our fleet opera-
tions. From early on, we always paid attention to the growth potential of the
unmanned aerial vehicles (UAV) market and have focalized our R&D efforts
into developing a wide array of UAVs.
Currently, however, the uncertainties of the market have yet to dissipate.
Making concerted efforts to preemptively respond to these uncertainties
and risk factors in the market is our primary task. Under the shared goal of
‘solidifying a growth through fundamental restructuring,’ we will reexamine
the structure of our functioning to create thorough, profit-oriented business
plans and enhanced productivity at a reduced cost.
2014 SUSTAINABILITY REPORT
Chairman & CEO Cho Yang-ho
LETTER FROM THE CEO
03
KOREAN AIR SUSTAINING EXCELLENCE
04
COMPANY PROFILE
Korean Air was founded in 1969 as the nation’s first air-
liner. Celebrating its 45th anniversary in 2014, its business
portfolio extends beyond its main businesses—passenger
and cargo transportation—to include aircraft component
R&D and MRO (maintenance, repair and overhaul) ser-
vices as well as related businesses, including catering/in-
flight sales, hotel/limousine services.
Corporate Overview
* Figures stand for FY 2013 ending on December 31, 2013
Company Name
Headquarters
TEL
Website
Main Business Areas
Sales
KOREAN AIR LINES.CO., LTD.
260 Haneul-gil (1370 Gonghang-dong),
Gangseo-gu, Seoul, Korea
+82-2-2656-7114
http://www.koreanair.com
Passenger/cargo transportation, aerospace,
catering service, in-flight sales, limousine service
KRW 11,712.4 billion
No. of Employees
Fleet
Routes
No. of Passengers
Carried
Freight Carried
Subsidiaries
20,567 (including overseas employees)
147 aircrafts
125 destinations in 44 countries
23.40 million
1.45 million tons
The company’s electronic disclosure at
http://dart.fss.or.kr
Sales
11,712.4
861.1
755.0
Operating Revenue
Ancillary
Others
Sales Performance for FY 2013
(KRW in billions)
10,096.3
2014 SUSTAINABILITY REPORT COMPANY PROFILE
05Sales by Business Area
Others (Unit: KRW billion)
Aerospace
2011
2012
2013
393.6
497.7
638.2
Catering Service
2011
2012
2013
74.2
85.7
91.7
Hotel & Limousine Service
2011
2012
2013
44.6
47.7
25.1
Air Transportation (Unit: KRW billion)
Cargo
2011
2012
2013
3,497.2
3,098.8
2,789.4
Others
2011
2012
2013
771.4
841.5
900.9
* Others include the revenue from in-flight sales, flight mileage
service, ground operations and warehousing.
Passenger
2011
2012
2013
7,024.3
7,690.3
7,267.1
Operating Results
1,665International
675Domestic
Passenger (Unit: 10,000 persons)
136.6International
8.4Domestic
Cargo (Unit: 10,000 tons)
1452,340
KOREAN AIR SUSTAINING EXCELLENCE
06
Korean Air 45 Years’ Milestones
1969 19901980 2000 2013
Flight Hours (Unit: 1,000 hours)
615
20
385
615
202
106
●
●
●
●
●
1969 19901980 2000 2013
Fleet (Unit: aircrafts)
147112
72
11
●
37
●
●
●
147
●
1969 19901980 2000 2013
Sales (Unit: KRW billion)
11,712.4
3.6
5,659.0
1,679.1
558.7
●●
●
●
11,712.4
●
Jun. 1962 Founding of Korean Air Lines Corporation
Mar. 1969 Privatization of Korean Air by
Hanjin Corporation
Oct. 1969 Launching of company’s first
international route
Oct. 1969 Introduction of Boeing’s quad-jet B720
1960's
Apr. 1971 First scheduled transpacific cargo
service to U.S.
Apr. 1972 First scheduled passenger service to
U.S. (Seoul-Tokyo-Honolulu-Los Angeles)
May 1973 Introduction of Boeing’s B747
Jumbo to transpacific routes
1970's
Dec. 1981 Completion of Korean Air international air
cargo terminal construction at Los Angeles
International Airport
Sep. 1982 Delivery of first home-manufactured
jetfighter F-5-E/F Jegong No. 1
Jan. 1983 Introduction of Total
Passenger Service System (TOPAS), a passenger
reservation and ticketing system
1980's
1969
2014 SUSTAINABILITY REPORT COMPANY PROFILE
07
Jun. 2000 Agreed to SkyTeam global alliance with
other founding member airliners
Nov. 2003 Launched Audio Video on Demand (AVOD)
Oct. 2003 Completion of eight A380 aircraft order
purchase
Jan. 2005 Obtained IOSA (IATA Operation Safety Audit)
certificate from International Air Transport Association
(IATA)
1969 19901980 2000 2013
Passengers (Unit: 10,000 persons)
2,340
70
2,207
2,340
1,226
350
●
●
●
●●
1969 19901980 2000 2013
Cargo (Unit: 10,000 tons)
145126
51
0
●
14
●
●
●
145
●
1969 19901980 2000 2013
Total Assets (Unit: KRW billion)
20,964.3
5.7
10,748.0
2,903.3
737.4
●●
●
●
20,964.3
●
1969 19901980 2000 2013
Total Shareholders’ Equity (Unit: KRW billion)
298.9
1.5
337.8
174.0
28.4
●
●
●
●
298.9
●
May 1992 First graduates from Korean Air Pilot
Training School
Mar. 1995 Reception of 100th aircraft
(B747-400)
Feb. 1998 Received Mercury Award in
catering service category
1990's 2000's
Mar. 2012 Completed enterprise resource planning
(ERP) system
Apr. 2013 Celebrated 10th anniversary of
Mongolian Afforestation Project
2010's
2013
KOREA
JAPAN
CHINA
SOUTHEAST ASIA
OCEANIA
AMERICAS
EUROPE/THE MIDDLE EAST/ AFRICA
CIS
KOREA
JAPAN
CHINA
SOUTHEAST ASIA
OCEANIA
AMERICAS
EUROPE/THE MIDDLE EAST/ AFRICA
CIS
Honolulu
●
Anchorage
Atlanta
Miami
Sao Paulo
Vancouver
TorontoChicago
Dallas
Washington D.C.
New York
Seattle
Las Vegas San Francisco
Los Angeles
●
●
●
●
●
●
●
●●
●
●
●
●
●
As the nation’s leading global carrier, Korean Air con-
nected the Incheon International Airport to 125 cities in
44 countries around the world as of the end of 2013. Our
commitment continues to remain devoted to providing ex-
pedient yet safe and convenient flights to our passengers
flying toward all corners of the world, spearheading the
cultural and industrial exchanges with numerous nations
throughout the world.
KOREAN AIR SUSTAINING EXCELLENCE
08
ROUTES IN SERVICE
● New Routes
Weihai
Shenzhen
Urumqi
Taipei
Yanji
Dalian
Hangzhou
Hong Kong
Xiamen
Huangshan
Nanjing
Shenyang
Tianjin
Jinan
Xian
Wuhan
Changsha
Kunming
Chengu
Mudanjiang
Qingdao
Zhengzhou
Guangzhou
Beijing
Shanghai/Pudong
Shanghai/Hongqiao
●
●
●
●●
●●
●
●●
●●
●
●
●
●
●●
●●●
●●
●
●
●
Destinations in China
26cities
Destinations in the Americas
15cities
525.1
726.7
896.1
1,294.5
3,07.6
2,366.6
1,027.2
123.3
16.4
128.4
322.1
391.2
32.3
1,153.5
722.0
23.5
Revenue from Passenger Routes Revenue from Cargo Routes (Unit: KRW billion) (Unit: KRW billion)
Moscow
Zaragoza
Istanbul
Kathmandu
Chiang Mai
Nadi (Fiji)
Brisbane
Auckland
Singapore
Tashkent
Madrid
Tel Aviv
Nairobi
Jakarta
Oslo
Copenhagen
Stockholm
Prague
Riyadh
Colombo
Cairo
Milan
Vienna
Dubai
Navoi
Siem Reap
Mumbai
Phnom Penh
Sydney
Hanoi
Manila
Palau
Ho Chi Minh
Brussels
Zurich
Rome
Jeddah
Male
Bali
Phuket
Penang
Bangkok
Yangon
Da Nang
Cebu
Guam
Paris
Basel
Amsterdam
Irkutsk
Frankfurt
Kuala Lumpur
Kota Kinabalu
London/Heathrow
Ulaanbaatar
Vladivostok
Saint Petersburg
●
●●
●
●
●●
●
●
●
●
●
●●
●
●●
●
●
●
●
●
●
●
●
●
●
● ●
●
●
●
●●
●
●
●
●
●●
●●
●
●
●●●
●
●
●
●
●
●
●
●●
●
●
2014 SUSTAINABILITY REPORT ROUTES IN SERVICE
09
Destinations in Oceania
6cities
Destinations in Southeast Asia
21cities
● ●
●● ●●●●●
●●●
●
●
●●●
● ● ● ●
●●
●
●
●
●
●
Hakodate
Aomori
Shizuoka
Okayama
Kagoshima
Fukuoka
Nagasaki
Seoul/Gimpo
Cheongju/Daejeon
Wonju/Hoengseong
Seoul/Incheon
Yeosu/Suncheon
Jinju/Sacheon
Oita
Sapporo
Akita
Niigata
Komatsu
Osaka
Nagoya
Gunsan
Gwangju
Busan
Ulsan
Pohang
Daegu
Jeju
Tokyo/Haneda
Tokyo/Narita
Destinations in Europe, Middle East and Africa
29cities
Destinations in Korea
13cities
Destinations in Japan
15cities
● KOREA 5.4
● JAPAN 8.5
● CHINA 12.1
● SOUTHEAST ASIA 16.8
● OCEANIA 3.4
● AMERICAS 35.0
● EUROPE/ THE MIDDLE EAST/ AFRICA 17.4
● CIS 1.4
Market Share in Sales (Unit: %)
KOREAN AIR SUSTAINING EXCELLENCE
10
VISION & BUSINESS PHILOSOPHY
In the pursuit of maximizing the level of customer satisfac-
tion, creating a professional, employee-initiated organiza-
tion and evolving towards a standard and principle-based
corporate culture, Korean Air believes in finding ways to
partner and grow with its stakeholders.
MISSION
EXCELLENCE IN FLIGHT
OPERATIONAL EXCELLENCE
SERVICE EXCELLENCE
INNOVATIVE EXCELLENCE
>
VISION
TO BE A RESPECTED LEADER IN THE WORLD AIRLINE COMMUNITY
>
2014 SUSTAINABILITY REPORT VISION & BUSINESS PHILOSOPHY
11
Adhering to standards and principles
▶ Establishing standards and principles on
par with global standards
▶ Pursuing flexibility in business based on
standards and principles
▶ Eliminating short-cut business operations
Organizational management based on
expertise and autonomy
▶ Mutual respect for expertise in various fields
▶ Rational decision-making based on an
efficient management system
▶ Seeking creative solutions through
harmonious relations
Creating an innovated and bettered
corporate culture
▶ Embracing a progressive and youthful mindful
▶ Change-embracing organizational culture
▶ Future-oriented reshuffling of business
structure by focusing on core competencies
Developing future growth engines with
competent human resources
▶ Formulating a top-tier team
▶ Devoting to fostering of key talent
▶ Gearing toward ‘employee-first’ corporate culture
Creating customer loyalty with highest level
of customer satisfaction
▶ Comprehensively and systematically approaching
customer relations
▶ Promptly attending to customer needs
▶ Maximizing customer value through the Management
By Wandering About (MBWA) practices
BUSINESS PHILOSOPHY
Customer-Oriented
Management
Appreciation of Talent
System-Based
Management
Principle-Based
Management
Change-Embracing
Management
CORPORATE GOVERNANCE
KOREAN AIR SUSTAINING EXCELLENCE
12
A commitment toward a mutual growth motivates Korean Air
to ensure that all its stakeholders’ are properly included in
the decision-making process. Comprising of non-standing
directors with a variety of academic and business back-
grounds in law, governmental policies and finance, the board
of directors contribute their profound knowledge to the
management decision-making process while taking note of
the economic, environmental and social impact of such de-
cisions. The diversity of communication media, namely the
corporate website and publications, allow us to share major
management issues and information with stakeholders on a
real time basis. In the future, we will continue to expand our
communication channels to better the reception of all that
are partnered with us.
Board of Directors Composition
Consisting of six standing and seven non-standing directors, Korean
Air’s board of directors (BOD) determines the solution to company
management issues. Four subcommittees under the BOD support the
board with their respective specialties in management, director recom-
mendation, auditing and internal control.
Subcommittees
Monitors the BOD’s activities and the company’s performance
Three non-standing directorsAudit Committee
Reviews and approves large-scale internal transactions
One standing and two non-standing directorsInternal Transaction
Committee
Reviews and makes decisions on issues commissioned by Board of Directors
Three standing and three non-standing directors
Management Committee
Selects candidates for non-standing director positions
Three standing and four non-standing directors
Non-Standing Director Nomination
Committee
Board of Directors (as of Mar. 21, 2014)
Standing
Chairman & CEO
President & COO
Senior Vice President & CFO
General Council
Senior Vice President & CSO
Senior Vice President & CMO
Chief Director of Hana High School, Former CEO of Hana Financial Group
Professor, College of Business Administration, Seoul National University
Lawyer, Doore Law Firm, Former Chief Justice of the South Seoul District Court
Chairman of Geoje Big Island Asset Management, Former Vice President of Korea Development Bank
Professor, College of International Trade, Inha University, Vice Chairman of the National Economic Advisory Council
Advisor to Kim & Chang Law Firm, Former Director of the Seoul Regional Tax Office
Lawyer, Lee & Ko Law Firm
Mar. 22, 2013
Mar. 22, 2013
Mar. 21, 2014
Mar. 22, 2013
Mar. 16, 2012
Mar. 16, 2012
Mar. 16, 2012
Mar. 16, 2012
Mar. 22, 2013
Mar. 16, 2012
Mar. 22, 2013
Mar. 16, 2012
Mar. 21, 2014
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
3 yrs
Chairman of the BOD
Chief of the Audit Committee
Cho Yang-ho
Chi Chang-hoon
Lee Sang-kyoon
Lee Tae-hee
Cho Hyun-ah
Cho Won-tae
Kim Seung-yu
Park Oh-soo
Lee Sog-woo
Lee Yun-woo
Hyun Jung-taik
Lee Joo-seok
Ahn Yong-seok
Name
Male
Male
Male
Male
Female
Male
Male
Male
Male
Male
Male
Male
Male
Gender Position/Career Date of Appointment
Term Remarks
Non-standing
2014 SUSTAINABILITY REPORT CORPORATE GOVERNANCE
13
Ownership Structure
Cho Yang-ho
National Pension Fund
Hanil Cement
Samsung Asset Management
Shinyoung Securities
31.62
6.08
0.79
0.71
0.52
-
-
-
-
-
Specially interested party
Shareholder
18,906,304
3,638,037
475,302
427,515
313,191
No. of Shares
Owner-ship
Transactions with Korean Air
Remarks
BOD Operational Performance Results
No. of BOD Meetings (meetings)
2011
2012
2013
6
8
9
Attendance Rate of Directors (%)
2011
2012
2013
81
84
78
No. of Approved Agenda Items (items)
2011
2012
2013
51
47
47
Attendance Rate of Non-standing Directors (%)
2011
2012
2013
89
89
94
* A total of nine BOD meetings were convened in 2013 to deliberate and
approve such agenda items as the BOD subcommittee composition, spin-off,
and order-placement of new airplanes.
Process to prevent any conflict of interests within
the board
The stipulations of Korean Air’s BOD regulations disqualify directors with vest-
ed interests in any particular agenda from the voting rights on the item in ques-
tion and are therefore unable to partake in the quorum at the meeting.
Top Decision-Making Body and Socially
Responsible Management
At Korean Air, the CEO also takes the chair of the board of directors, com-
missioning decisions to be made on the overall corporate management issues,
including the sustainability management. Additionally, the Top Management
Council, comprising of the chief officers of each business division, supports the
BOD with constructing policies on company business strategy and sustainability
management. This council serves to reflect the expectations and demands of
stakeholders regarding the company’s economic, social and environmental ac-
tivities while further examining these issues to formulate the soundest solution
for the entire company. Korean Air arranges regular meetings of this council to
ensure constant monitoring and review of the agenda items and resolutions.
Evaluation and Remuneration to Directors and
Executives
Remunerations of non-standing directors are determined by the resolutions
founded at the general shareholders’ meeting (GSM). In order to ensure the
independency and expertise in the decision-making process of non-standing
directors, Korean Air does not believe in operating compensation system in
accordance with the rewarding of performance evaluation results. In 2013,
the GSM capped the remuneration of the BOD at KRW 5.0 billion. The actual
payment toward directors amounted to KRW 4.76 billion. Simultaneously act-
ing as standing directors, top executives are compensated based on their
accomplishments toward set goals for sustainability management practices
inclusive of the risk/opportunity factors in the business environment. The me-
dian of payments to all Korean Air employees was 2.13 percent of the highest
payment made to a single member.
Stakeholder Communication Channels
Korean Air soundly discloses all major management data to its stakeholders
through communication channels such as investor relations publications, gen-
eral shareholders’ meetings, IR meetings, and IR websites as well as its busi-
ness reports, quarterly and semi-annual reports and other regular reports. In
particular, the sustainability report is published with the approval of the vice
presidents and presidents of all Korean Air divisions.
KOREAN AIR SUSTAINING EXCELLENCE
14
BUSINESS ETHICS
In the pursuit of maximizing the level of customer satisfac-
tion, creating a professional, employee-initiated organiza-
tion and evolving towards a standard and principle-based
corporate culture, Korean Air believes in finding ways to
partner and grow with its stakeholders.
Charter of Ethics
Korean Air regards transparency and responsibility as vital 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,
we vow to abide by Korean Air’s new-instituted Charter of Ethics.
● Regard customer satisfaction and safety as our highest priority.
● Exert nothing but the best of efforts in increasing investment value for
our investors.
● Respect all employees and make an effort to enhance their quality of life.
● Promote joint development with our business partners based on mutual trust.
● Respect the principles of free competition and remain at the forefront of
the development of the airline transport industry.
● Contribute devotedly to the development of society and preservation of
the environment.
● Acknowledge the corporate principles set forth by the company and
uphold all of our obligations and responsibilities.
Korean Air Business Ethics Practices
Korean Air Business Ethics Timeline
● Jan. 2001: Enactment and declaration of Charter of Ethics
● Oct. 2002: Implementation of ‘Whistle-Blowing’ System
● Jul. 2012: Appointment of First Compliance Officer
● Mar. 2014: Introduction of regulations mandating voluntary self-report
of related parties on the same value chain of Korean Air
CEO’s Commitment to Business Ethics
“Korean Air owes much to society for its growth to date making
it our duty to apply transparency and compassion-based busi-
ness ethics to company management practice. Our particular
focus should be placed on mutual partnerships with suppliers,
ensuring the welfare of local communities, taking action to cre-
ate a better world and contributing expertise to the develop-
ment of local communities and co-prosperity with suppliers. In
time, we will be rewarded with a sense of trust enabling us to
further enhance the competitiveness and brand value of Ko-
rean Air.”
- Excerpt from Korean Air CEO New Year’s speech on Jan. 2, 2014
세계 항공업계를 선도하는 글로벌 항공사
● Ethics training for employees
● Integrity pact
● Business Ethics database
Employee Ethics
Training
Code of Ethics Behavioral Guidelines
To be a respected leader in the world airline community
● Environmental management system
● Sustainability report
Environmental Management & Sustainability Management
● Transparent corporate governance
● Internal control system
● Compliance program
Transparent Management
● Volunteer corps
● Disaster relief activities
● Afforestation project in Mongolia
● Donations
Social Contribution
● Supplier support programs
● Fair transactions guidelines/compliance program
● Voice of Customer (VoC)
● Safety Management Program
Win-Win Partnership & Customer Satisfaction
↑
2014 SUSTAINABILITY REPORT BUSINESS ETHICS
15
Raising ethical awareness of employees
All employees are mandated to complete the biennial ethics training course on
the internal self-learning network to be reminded of their commitment to busi-
ness ethics and submit the integrity pact at the end of the course.
‘Whistle-Blowing’ Program
Committed to eliminating all irregularities or corruption from its premises,
Korean Air has been operating the whistle-blowing program since October
2002. Anyone can report witnessed malpractices via e-mail at jebo@koreanair.
com. Reported cases are verified through internal investigation before appro-
priate measures are taken, such as absolving or correcting corruption, malprac-
tice, and inefficiency in routine or policy. The whistleblower is protected under
the established framework as stipulated in the corporate bylaws and regulations
and provided with feedback on their reports. In 2013, a total of 23 cases were
reported and appropriately processed following the established procedures.
Compliance Program
Korean Air has adopted a voluntary compliance program to abide by relevant
rules and regulations regarding fair trade, followed by the establishment of an
internal inspection system for its actual operation. Since the declaration of
the CEO in 2004, Korean Air has set its sights on establishing and promoting
compliance practices with fair trade regulation while setting up an internal or-
ganization to prevent any irregularities or cartels within the industry.
Internal Control System
Korean Air regularly monitors the status of internal operations through the es-
tablished internal accounting control system, ensuring transparent disclosure
on the company’s accounting information that was verified with its credibility.
The monitoring scope also covers the entire business process, as well as ac-
counting, to detect loopholes and better upon the company’s operations.
Establishes the underlying business philosophy and business policies
Charter of Ethics
Seven principles of behavioral guidelinesBehavioral Guidelines
Action plans and clear standardsAction Guides
‘Whistle-Blowing’ system
Compliance Officer
Voluntary self-report of related parties on the same value chain
Risk Management System
International regulations on cartels
Compliance with the antitrust regulations
How to steer clear of sexual harassment risks at work
Business ethics practices at Korean Air
Introduction to the compliance program
2
1,019
17,685
826
16,785
2013
International regulations on cartels
Compliance with the antitrust regulations
How to steer clear of sexual harassment risks at work
Business ethics practices at Korean Air
Introduction to the compliance program
3
206
21,485
824
-
2012
Anti-corruption Education Performance (Unit: persons)
International regulations on cartels
Compliance with the antitrust regulations
How to steer clear of sexual harassment risks at work
Business ethics practices at Korean Air
Introduction to the compliance program
11
130
21,157
2,221
-
2011
International regulations on cartels
Compliance with the antitrust regulations
How to steer clear of sexual harassment risks at work
Business ethics practices at Korean Air
Introduction to the compliance program
16
1,355
60,327
3,871
16,785
Total Hours of Education
KOREAN AIR SUSTAINING EXCELLENCE
16
CRISIS MANAGEMENT
Non-financial Risk Management
● Constantly monitoring all laws and regulations
● Responding to regulatory risks with legal experts
● Maximizing efficiency of fuel use and saving costs through strategic operation of low-cost emissions trading
● Investing in community development infrastructure
● Engaging in diverse social contribution activities
● Expanding communication channels with local communities
● Compliance with local laws and regulations in each country
● Carbon controls (EU ETS, GHG & Energy Target Management System, etc.)
● Issues concerning local communities, NGOs, etc.
Regulatory
Community
Risk FactorsRisk Types Countermeasures
● Annually checking economic and aviation industry forecasts and trends as well as their impact on our business, followed by development of necessary countermeasures
● Pursuing profitable growth through profit-oriented route operations and an enhanced global network
● Focusing on high-end customers through strategic operation of high-end fleet and enhanced customer services
● Timely response to market changes and customer demands through flexible operations according to market demands
● Global economic developments
● Competitive low-cost airlines market
● Global carriers’ inroads into the Korean market
Market
● Establishing a safety management system under a safety-first policy
● Operating a Safety & Security Office under direct control of the COO to prevent accidents
● Setting procedure for operating a response center by regulation, guidelines, manuals and division in event of an airplane accident
● Annually performing company-wide drills respond to airplane accidents
● Regularly checking contingency plans and revising emergency response procedures
● Operating the Safety Coordinators, ‘Go Team’, ‘Care Team’
● Airplane accidents or hijackingOperational
● Consistently monitoring oil prices and developing purchase strategies
● Oil price options, oil swaps, etc.
● Oil price hikesResource
● Compliance with pollutant emissions regulations, company-wide environmental risk prevention activities and environmental accident contingency plans
● Adoption and operation of high-efficiency aircrafts, optimal routes and short-cuts, optimization of fuel loads, economic flight procedures, enhancing aircraft performance
● Greenhouse gas inventory system
● Environmental accidents
● Climate change
Environmental
2014 SUSTAINABILITY REPORT CRISIS MANAGEMENT
17
Financial Risk management
● Balancing out the bottom-lines of incoming and outgoing currencies
● Keeping even percentages of fixed and floating interest rates of debt portfolio
● Fuel prices/Foreign exchange rates: Hedging between the rate of 30 percent of annual exposure in consideration of statistical figures and market developments
● Interest rates: Shifting between the floating rates to fixed rates under interest rate-swap agreements in accordance with market conditions.
Fuel prices
Foreign exchange rates
Interest rates
Risk Factors
ACTIVE HEDGE
NATURAL HEDGE
>>Strategies
Natural Hedge Active Hedge
KOREAN AIR SUSTAINING EXCELLENCE
18
MATERIALITY TEST
Korean Air selected the stakeholder groups and ran the
materiality test according to procedure provided by the
GRI G4 Guidelines and the ISO 26000 standard on social
responsibility. Based on the results of the test, the report-
ing content and methodology was prioritized to cover all
information of concern to our stakeholders.
* Relevance test: 46 relevant issues were finalized from the issues provided
by the GRI G4, Sustainability Topics for Sector (GRI) in accordance with the
relevance guidelines as provided by the ISO 26000
* Materiality Test: Results of the relevance test verified the issues requiring a
survey were included in the surveys on the internal and external stakeholders.
Survey results were analyzed to finalize the 11 trend issues and 14 impact
issues as the material issues to be covered in this report.
Reporting Content Definition Process
● Stakeholder interview● Benchmark● Media analysis● Review of material issues
in the previous year
Material Issue List-up(report contents)MaterialityRelevance
Materiality Test
Stakeholder Survey
Category Frequency Percentage
Internal
External
Total
Employees
Governmental agencies
Customers (domestic & global)
Affiliates and subsidiaries
Local communities
Suppliers
R&D Centers, related organizations
Part-timers/interns
66
3
56
1
1
13
4
1
145
45.5%
2.1%
38.6%
0.7%
0.7%
9.0%
2.8%
0.7%
100%
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
2014 SUSTAINABILITY REPORT MATERIALITY TEST
19
Materiality Test Outcomes Changes in Priority 2013 vs. 2014
Changes
Same
Down
Up
Increased demand for stability of products & services
Diversified customer needs
Increased demand for customer information security
Increased demand for business transparency
Growth in number of customers valuing health,
eco-friendliness and pro-social behavior
Active promotion of affordable airline market
Acceleration of technology advancement
Intensifying market competition
Increased importance of need for talent
Growth in global interdependence following globalization
Easy access to corporate information
(via Internet, SNS, etc.)
Increased demand for fair transactions
Health and safety at work
Customer health and safety
Guarantee of fundamental rights at work
Digital inclusion
Employee education and training
Climate change (global warming)
Increased exportation of high value-added products
Protection of customer information
Increased demand for fair competition and mutual growth
Energy use
Product and service labeling (customer satisfaction)
Development of importance of securing and
managing a stable supply chain
Market position (wages, procurement, recruitment)
Optimizing socially responsible investment (SRI)
Impact of transport on the environment
Economic achievements
(revenue, pensions, government grants)
Strategies responding to external factors
Stakeholder engagement
Wastewater and waste material, CO2 emissions
Fuel consumption
Job creation
Increased green purchase
2013 Key Issues
Increased demand for stability of products & services
Response to fluctuation in foreign exchange rates
and oil prices
Intensifying market competition
Increased importance of need for talent
Diversified customer needs
Health and safety of customers
Emissions (atmospheric)
Growth in global interdependence following
globalization
Growth in number of customers valuing health,
eco-friendliness and pro-social behavior
Climate change (global warming)
Acceleration of technology advancement
Product and service labeling (customer satisfaction)
Growth in importance of securing and
managing stable supply chain
Training and education
Economic achievements
(revenue, pensions, government grants)
Energy consumption
Products & Services (environmental impact)
Optimizing socially responsible investment (SRI)
Market position (wages, procurement, recruitment)
Growth in demand for fair competition and
win-win partnership
Indirect economic benefits (SOC investments, up-
and down-stream industries, expected benefits)
Lending business acumen to social contribution
Recruitment (gender, new, part-time)
Corporate governance (stakeholder communication)
Public recognition of the company as a
conservative old-timer
2014 Key Issues
4.60
4.60
4.40
4.20
4.00
3.80
3.60
3.40
3.20
3.40 3.803.20 3.60 4.00 4.20 4.40
1
2
4
25
19
67
Increased demand for stability of products & services
Increased importance of need for talent
Health and safety of customers
Emissions (atmospheric)
Diversified customer needsGrowth in number of customers valuing health, eco-friendliness and pro-social behavior
Climate change (global warming)
Acceleration of technology advancement
Training and education
Economic achievements (revenue, pensions, government grants)
Products & Services (environmental impact)
Lending business acumen to social contribution
Recruitment (gender, new, part-time)
Corporate governance (stakeholder communication)
Public recognition of the company as a conservative old-timer
Optimizing socially responsible investment (SRI)
Market position (wages, procurement, recruitment)
Growth in importance of securing and managing stable supply chain
Energy consumption
Product and service labeling (customer satisfaction)
Growth in global interdependence following globalization
Response to fluctuation in foreign exchange rates and oil prices
Intensifying market competition
Growth in demand for fair competition and win-win partnership
Indirect economic benefits (SOC investments, up-and down-stream
industries, expected benefits)
◀ S
take
hold
er C
on
cern
Impact on the business ▶
3
11
5
8
9
10
13
15
1617
18
20
21
22
23
24
14
12
KOREAN AIR SUSTAINING EXCELLENCE
20
VALUE CHAIN
Guaranteeing the safe and fast transportation of passen-
gers and cargoes to their respective destinations is of our
utmost priority. Our in-flight services help our passengers
enjoy a safe and convenient flight on board making MRO
operations the most important part of our ground opera-
tions in ensuring a safe flight. Furthermore, we also par-
ticipate in R&D efforts for future aircraft technologies and
rockets. Our services dismantle the physical and mental
distances, stimulating cultural exchanges and economic
development with the freedom of movement. The aviation
industry brings the world closer together and Korean Air is
proud to be part of it.
Procurement of flight operation supplies
Procurement
Marketing and sales of Korean Air’s services
Marketing/Sales
Manufacturers:
aircrafts, jet engines and components
PR, advertisement
Refiners: jet fuels
In-flight meal manufacturing
Farmers and retailors:
agricultural produce and in-flight
meal ingredients
MRO (maintenance, repair,
and overhaul)
Product prices:
promotion, sales
2014 SUSTAINABILITY REPORT VALUE CHAIN
21
Check-in, boarding, catering service, in-flight entertainment
Flight Operation
Stakeholder Value Distribution by Korean Air (Unit: KRW billion)
Korean Air actively practices social contribution with job creation and supplier support programs. While serving customers with its main businesses of passenger and cargo transportation,
taxation obligations are faithfully seen through ultimately contributing to the nation’s economy.
Employee Local communitiesShareholders CreditorsTax Services Suppliers
Wages 1,427.7
Fringe benefits 271.0
Donations 10.8Dividends - Interest expenses 437.4Corporate income
tax 2.6
Rental 198.5 Fuel expenses 4,352.0
Manufacturing expenses 694.6
Airport maintenance 1,108.8
Aerospace business: R&D for
aircraft/unmanned aerial vehicles,
satellites/rockets
Passenger: check-in, boarding, catering
service, in-flight entertainment
Cargo
Airplane cleaning, waste disposal
Post-flight Operation
Waste disposal
Airplane cleaning
GROWTH FOREXCELLENCE
On January 1, 1914, an airplane took to the air, flying the first historical commercial
flight from St. Petersburg Port to Tampa Bay in Florida, U.S. The one and only passenger,
who won the bid for flight through an auction for USD 400, was then-mayor of St.
Petersburg. Current monetary value sees that USD 400 equivalent to what would be
now USD 9,300. It was the historical landmark investment toward a new future of faster
and safer transportation contributed by that first historical passenger on board.
400 dollars
22
In 2013, Korean Air recorded KRW 11,712.4 billion in sales from transporting a total
of 23.4 million passengers and 1.45 million tons of cargo. Safe, fast-service flights and
delivery help numerous people around the world bolster the value of their businesses,
experience different cultures and better understand each other. The aviation
industry contributes economically to countless people and Korean Air is proud to be
a part of this chain of value creation.
KRW 11,712.4 billion
23
24
While working hard to contribute to global economic growth through strengthening our sales numbers, we continuously strive to reinforce the competitiveness of a growth-propelled aviation industry.
Economic results (revenue, dividends, government grants) / Market position (wages, procurement, recruitment) / Indirect economic benefits / Increased socially responsible investments / Growth in global interdependence following globalization / Acceleration of technology advancement / Intensifying market competition
Key Economic Issues
Korean Air’s strategy for higher economic performance results
Realizing substantial growth through fundamental renovation and stable revenue structure
● Solidifying its market leadership through fleet modernization and global marketing
competencies● Securing new growth engines by developing new markets, products and services● Fortifying system-based business operation to realize profitable growth
● Bolstering our network competitiveness through optimized fleet operation and scheduling● Increasing productivity with low-cost, high-efficient business model● Furthering operation efficiency with reinforced human resources/organizational
competencies
↑
Establishing a stable revenue
structure
Enhancing efficiency
and productivity of enterprise resources
25
Transportation (Unit: million persons/ million tons)
New Routes
23.40 Passengers
Passengers Cargoes
23.30
24.28
23.40
2011
2012
2013
1.71
1.54
1.45
2011
2012
2013
●
●
●
Incheon~Colombo/Male
Busan~Nanjing
new routes2Fleet Introduction/Disposal
2011
16
4
2012
14
8
2013
10
9
Introduction Disposal
9 6
2011 2012 2013
2
Fleet Investment Amount (Unit: KRW billion)
Sales (Unit: KRW billion)
2,400.6
1,851.0
1,481.1
2011
2012
2013
11,803.1 11,712.4
2011 2012 2013
1.45Cargoes
Major Economic Achievements
12,261.7
26
Korean Air’s sustainable
growth also contributes to
the growth of society
and the nation with its
economic impact.
GROWTH FOR EXCELLENCE
KOREAN AIR SUSTAINING EXCELLENCE
Economic Performance
The global air transport industry supports 58.1 million jobs world-
wide and contributes USD 2.4 trillion to global gross domestic product
(GDP).* Domestically, it creates 575,800 jobs and USD 28.4 billion to
Korea’s GDP. In particular, the increased investment in SOC projects to
meet the level of increased travel and tourism demand among Asian
people is expected to conjure a deeper economic impact, while also
bringing the global community closer. As the nation’s leading airliner,
Korean Air takes pride in contributing to the development of the global
aviation industry with its profit-generating business activities. All the
while, creating jobs and contributing to the national and global GDP in
addition to distributing its profits to all stakeholders.
* Sources: ATAG, Aviation Benefit beyond borders_2014_Apr_54p
Market Overview and Outlook
The world’s aviation industry witnesses explosive growth in the number
of passengers every year. In fact, the 4.3 percent annual growth rate of
market demand for air transport over the five-year period from 2008
to 2012 is projected to further grow to a rate of 5.4 percent during the
next five-year period beginning from 2013. In particular, the number of
traveling passengers between the Asia-Pacific regions is predicted to
show a robust 5.7 percent annual growth rate for the same period. The
actual growth rate of international passengers rose by 5.2 percent year
on year in the Asia-Pacific region, while the international cargo trans-
port in the same market dropped 0.6 percent for the same period. This
decline can be explained by the delayed recovery of the global economy
and sagging market demands for cargo transport. However, the market
demand for international cargo transport is forecast to start gaining
ground in 2014 when advanced economies in Europe start to recover,
boosting the import and export volumes.
On the domestic front, the number of outbound and inbound passen-
gers edged up by 7.7 percent and 9.6 percent respectively for the same
period in 2013, ultimately translating to an overall passenger increase
of 9.2 percent. This growth rate is anticipated to continue for the time
being, thanks to improved immigration services, including visa issuance,
Brazil World Cup and Incheon Asian Games, as well as the explosive
growth in the China-destined travelers.
2013 Condensed Balance Sheets
2011 2012 2013
Total Assets
Total Liabilities
Total Shareholders’ Equity
20,222.5
18,036.1
2,186.4
20,678.0
18,304.3
2,373.7
20,964.3
18,693.7
2,270.6
(Unit: KRW billion)
PROGRESS
CONTEXT
27
2014 SUSTAINABILITY REPORT GROWTH FOR EXCELLENCE
Fleet (as of the end of 2013)
Type Dec. 31, 2012 Dec. 31, 2013
Passenger
Passenger Aircraft Total
Cargo Aircraft Total
Grand Total
Cargo
A380-800
B747-400
B777-300ER
B777-300
Large-size Subtotal
B777-200
A330-200
A330-300
A300-600
B737-800
B737-900
Small-size Subtotal
B747-400F
B747-8F
B777F
6
15
10
4
35
18
7
16
3
20
20
84
119
23
2
2
27
146
8
14
12
4
38
18
8
15
2
18
22
83
121
19
4
3
26
147
2013 Condensed Income Statements
2011 2012 2013
Sales
Gross Profit
Operating Income (loss)
Income Before Income
Taxes (loss)
Net Income (loss)
11,805.3
1,599.5
394.1
(443.0)
(301.1)
12,261.7
1,396.0
277.6
396.4
259.6
11,712.4
1,105.9
(18.0)
(401.1)
(290.5)
New Routes in 2013
Routes Aircraft Schedule First Flight
Incheon-Colombo/Male
Busan/Nanjing
A330
B737
3 flights/week
4 flights/week
Mar. 9, 2013
Jul. 12, 2013
(Unit: KRW billion)
28
SUSTAINING EXCELLENCEGROWTH FOR EXCELLENCE
KOREAN AIR
Passenger Business Strategies
Amid the skyrocketing oil prices and relentless competition in the aviation in-
dustry, Korean Air pursues stronger competitiveness and sustainable growth
according to the following business strategies for passenger transport.
● Route schedule flexibility considering difference between high and low
seasons, while increasing supply of profitable routes by assigning optimal
aircrafts to each route
● Strategically utilizing top-notch aircrafts to increase sales of high-end class
seats and strengthening alliance marketing to penetrate the premium and
commercial markets
● Securing sustainable growth platform with strategic development of
new markets with high growth potential; Launching of new scheduled
flights for Incheon-Colombo/Maldives and Busan-Nanjing routes in 2013
2014 Business Strategy & Key Tasks
Fundamental business restructuring to strengthen growth platform
↑
Profit-oriented business
operations
● Streamlining the organization and increasing outsourcing● Enhancing the operational rate of high-efficient
machinery and quickly adopting new equipment meeting market demand
● Making full use of idle cargo planes and enhancing cost competitiveness of passenger planes
Higher cost competitiveness
through improved resource
productivity
● Strengthening market anticipation and responsiveness to customer demand
● Taking over reins in growth engine businesses and increasing network competitiveness
● Building on business alliances and developing new business models
Reinforcing core competencies
for higher global competitiveness
“ Korean Air is ahead of the pack in effectively
responding to major CSR trends and sustainability
issues through continuous fleet modernization and
constant management of environmental issues.
I was impressed by its bold step of adopting the new
aircraft model, A380, before any Korean airliners
and its aggressive expansion in new markets and
business fields. In that context, Korean Air commands
undisputed leadership in the market. Nonetheless, the
current issues regarding the company’s governance
and rising debts arouse prudence in its management
practices of financial and non-financial risks. Going
forward, I think Korean Air needs to further bolster
its responsiveness and willingness to take on new
challenges plus take on a more far-sighted approach
to its business strategies so that it may establish
stable business fundamentals unswayed by
temporary issues.”
Kim Min-ji Analyst at e-Trade Securities
Stakeholder Interview
● Improving profitability in passenger/cargo transport operations
● Year-round cost-reduction campaigns● Cost structure renovation through cutback on
fixed costs
Fleet Operational Plans
● A total of 56 new passenger crafts (including two A380, 10 B747-8I, and 10
B787) and five new cargo crafts (three B747-8F and two B777F) are to be
initiated into the fleet between 2014 and 2019 to meet the growing market
needs for air transport.
● New light-weighted, high fuel-efficient aircrafts will significantly increase
flight distance, making them optimal for long-haul routes. Out-of-date,
low-efficient aircrafts, such as A300-600 and B747-400, are slated to be
phased out.
29
2014 SUSTAINABILITY REPORT GROWTH FOR EXCELLENCE
Routes Operation Strategies
● Identifying new market demand for business or leisure purposes and strengthening regional network in China and Southwest regions
● Diversifying schedule to enhance market competitiveness and connection between routes
Constant market development and
network improvement
● Adjusting supply and scheduling to regional market demand and/or foreign exchange fluctuations
● Effective competition strategies in proportion to the growing market supply for America- Asia routes
Proactive response to market
changes
● Scaling down on low-demand, low-profit routes
● Actively tapping into the market demand for non-scheduled routes by utilizing idle cargo planes
Profit-oriented routes operation
Enhancing efficiency in fleet
operation
● Increasing operational rate by boosting assignment of high-density aircrafts to long-haul routes
● Adopting use of large-sized passenger planes in consideration of market demands for passenger and cargo transports
(Incheon-Houston route currently in works); Pursuing new market de-
mands through expansion of network with non-scheduled routes to cap-
ture niche markets.
Cargo Business Strategies
In cargo transport operations, we are concentrating our cargo airplanes on
profitable routes built upon our strengths of quality transport service, global
network, varied product & service line-ups while making full use of the pas-
senger planes’ cargo transport; thus helping us secure both cost competitive-
ness and route profitability.
● We currently work on improving profitability by selling new, highly profitable
products that meet customer needs, such as the cargoes for medical sup-
plies, fresh freights and e-commerce freights.
● Following the adoption of the new, high-fuel efficient cargo plane models,
namely two B747-8Fs and one B777F in 2013, one of each craft will be
launched into operation and planes beyond their peak will be taken off the
line in 2014 to enhance efficiency in our fleet operation.
● Penetrating into the niche market of our exclusive passenger transport
routes, we are rigorously developing new sources of revenue, such as the
routes on Xian in China, and other cities in Vietnam and Latin America. In
2014, we will take advantage of the increased traffic rights as agreed in
the Korea-China Aviation Talks in pursuit of the new opportunities in the
Chinese market.
● Preemptively seizing business opportunities in the highly-potential yet ex-
clusive, U.S. route
New Route Plan in 2014
Route Aircraft Schedule First Flight
Incheon-Houston B777 7 flights/week May 2, 2014
NEXT STEP
PEOPLE FOREXCELLENCE
30
Tony Jannus was the pilot of the Benoist Airboat, the airplane that served the world’s
first scheduled airline service in 1914. After his first flight, Jannus continued piloting
this 8 meter-long airboat twice a day back and forth the first historical commercial route
between St. Petersburg and Tampa. The world’s first scheduled airline, St. Petersburg-
Tampa Airboat Line transported 1,204 passengers with only eight days of flight
cancellation until its contract terminated three months later.
Tony Jannus pilot
31
As of 2013, the number of Korean Air’s employees was recorded at 20,433. Every year, the company
hires 1,200 to 2,500 new employees and assists them with systematic training and education programs
to gain expertise in their respective job duties be it ground operations, engineering or part of the
cockpit and cabin crews. Greater experience led to more sophisticated and diversified services,
eventually contributing to the advancement of the global aviation industry. Employees’ expertise and
teamwork remains to be the unchanged, underlying factor to a 100-year-old aviation industry.
20,433
32
Committed to a higher quality of life for our employees, we offer generous fringe benefits and foster competent experts in the industry throughout the globe with varied and efficient education on top of training programs.
Increased importance for inclusion of talented team members, employment, and training & education
Key Employee Issues
● Seeking fundamental changes and a greater dynamic in corporate culture
- Reinforced change management through interactive communication covering entire organization
- Training systems cultivating minds to innovate along with strong sense of responsibility in our employees
● Varied maternity protection programs
● Operating Korea’s first technology-oriented university, Jeongseok University, and supporting employees’ life-long learning with subsidies for tuitions
● Employee communication programs: Companionship Campaign (2013) and Hanmaeum Campaign (2014)
● Operating the Industrial Health and Safety Committee
● Management of health and safety indicators concerning injury rates
Our efforts toward better employee welfare and corporate culture
33
714 470 Female Male
New Employment (Unit: persons)
2011
2012
2013
1,801
732
769
714
684
470Female Male
Korean Air does not discriminate its employees
by gender, age, religion or regional background
and strictly abides by the local laws and regula-
tions pertaining to the location of operation.
Per-Employee Education Hours (Unit: hours)
131 101
Percentage of Female Employees
2011
167
111
2012
125
100
2013
131
101
Occupational Injury Rate (Unit: %)
Maternity/Baby Breaks (Unit: cases)
712 1,064 1,038
2011 2012 2013
2011 2012 2013
0.070.06
0.08
201342.6%
Major Achievements in Employee Welfare
Female Male
Promoting Employee Equality
Korean Air does not tolerate any form of discrimination in employment,
assignment, evaluation and compensation based on gender, age, reli-
gion, or regional background. We also comply with local laws and regu-
lations at all our operations, domestic and overseas. We also prohibit
forced labor, child labor and any form of extortion as stipulated in the
Korean Labor Standards Act and ILO Conventions.
Business Philosophy Valuing People
Korean Air’s founder had a strong belief that a company is the sum of
its people and that a good education can inspire change in people. This
belief has been handed down for the past few decades, setting the
guidelines for employee policy, regarding recruitment, compensation,
education and training, fringe benefits and corporate culture.
At Korean Air, people from various professions are working together in
ground operations, engineering, and flight operations. The different re-
quirements coinciding with these professions result in a non-discrim-
inate environment when it comes to the consideration of employment
or compensation by gender or employment status (regular or contract-
based). In particular, we pay special attention to the well-being of fe-
male workers with our practical programs to support maternity. Addi-
tionally, we have in place a number of professional training/education
programs related to the aviation industry, helping our employees rear
their expertise in their own professions. We strongly believe this also
helps enhance the quality of life for all our employees as well.
34
Korean Air believes
its commitment to employee
satisfaction can help job
security and upgrade the
quality of life for all.
PEOPLE FOR EXCELLENCE
KOREAN AIR SUSTAINING EXCELLENCE
* as of Dec. 31, 2013, executives not included
Classification Crews
(cockpit/cabin)
Ground Operation (general
affairs/ marketing/ transportation)
Engineering (aviation, aerospace, research,
procurement, communication, and flight management)
Others
(IT/catering, etc.)
Total
Total
Male
Female
8,327
2,790
5,537
6,424
3,405
3,019
5,272
5,188
84
410
348
62
20,433
11,731
8,702
Employees by Gender and Profession
PROGRESS
CONTEXT
35
2014 SUSTAINABILITY REPORT PEOPLE FOR EXCELLENCE
Workforce Breakdown by Employment Status and Region* As of Dec. 31, 2013, executives not included
3,755
(2,841/914)
14,708
(8,076/6,632)
Managers (Male/Female)
Staff (Male/Female)
Employment Status
Number of employees (persons)
463
(284/179)
277
(163/114)
121
(88/46)
2,371
(1,175/1,196)
18,463
(10,917/7,546)
1,970
(807/1,163)
18,062
(10,549/7,513)
Americas (Male/Female)
Europe (Male/Female)
Others (Male/Female)
Subtotal (Male/Female)
Regular
(Male/Female)
Contract-based
(Male/Female)
Domestic
(Male/Female)
Overseas
RegionEmployment Contract
665
(226/439)
569
(252/317)
263
(162/101)
Japan (Male/
Female)
China (Male/Female)
Southeast Asia (Male/Female)
Number of employees (persons)
Employee Turnover Rate
No. of new employees * As of Dec. 31 of each year, executives not included
New employee New employee New employeeTotal workforce Total workforce Total workforce
2011 2012 2013
732
1,801
2,234
254
38
7
2,100
433
684
769
1,142
275
25
11
1,062
391
470
714
933
199
43
9
861
323
11,631
8,903
5,836
6,520
5,721
2,457
18,236
2,298
11,732
8,902
5,588
6,590
5,904
2,552
18,127
2,507
11,724
8,709
5,076
6,586
6,089
2,682
18,322
2,111
Classification Unit
Gender
Age
Region
Male
Female
Under 30
30~39
40~49
Above 50
Domestic
Overseas
(persons)
(persons)
(persons)
(persons)
(persons)
(persons)
(persons)
(persons)
36
SUSTAINING EXCELLENCEPEOPLE FOR EXCELLENCE
KOREAN AIR
Korean Air’s Initial Wage vs. the Minimal Wage
As known very well within the industry, Korean Air offers a significant rate
of initial wage to its employees with no discrimination based on their job
functions. Our annual pay rate sees new employees in the ground opera-
tion profession get 2.9 times higher than legal minimum wages (Korean
legal minimal wage is KRW 4,860/hour as of 2013). Apart from annual pay,
the company pays out performance-based incentives and safety incentives
based on safety performance evaluation results to encourage more dedica-
tion toward employee safety at work.
Percentage of Locally-hired Managers
Living up to its name as a globally competitive carrier, Korean Air gathers
every resource to recruit and retain a talented, global team under the no-
tion that localization is the key to successful global expansion. Our com-
prehensive non-discriminate employment policy contributes to job creation
in operations overseas within local communities. Also, we actively foster
locally-hired managers with various programs to help them attain a higher
competency in their respective job professions.
No. of Employee Severance * As of Dec. 31 of each year, executives not included
No. of employee severance
No. of employee severance
No. of employee severance
Total workforce Total workforce Total workforce
2011 2012 2013
404
719
448
363
182
130
741
382
409
807
543
359
149
165
755
461
402
788
473
395
148
174
730
460
11,631
8,903
5,836
6,520
5,721
2,457
18,236
2,298
11,732
8,902
5,588
6,590
5,904
2,552
18,127
2,507
11,724
8,709
5,076
6,586
6,089
2,682
18,322
2,111
Classification Unit
Gender
Age
Region
Male
Female
Under 30
30~39
40~49
Above 50
Domestic
Overseas
(persons)
(persons)
(persons)
(persons)
(persons)
(persons)
(persons)
(persons)
Category No. of Employees (%)
No. of overseas employees
Percentage of locally-hired employees
Percentage of locally-hired managers
2,378 persons
88.8%
14.8%
Percentage of Locally-hired Managers
* 2As of Dec. 31, 2013, no executives included
PAYMENT- Job function/class
- Basic pay rate
- Annual pay scheme
INCENTIVE- Profit sharing (PS)
and productivity incentives (PI)
- Safety incentives
BENEFITS- Medical/Pension premium
subsidies
- Airline tickets
- Housing/ tuition supports
Total Compensation
37
2014 SUSTAINABILITY REPORT PEOPLE FOR EXCELLENCE
Performance Evaluation for Fair Compensation
Korean Air runs its own comprehensive, specialized evaluation system called
the KAL Performance Appraisal System (KALPAS) while each job function
has Standard Performance Indicators. We also have a separate examination
for crew members to ensure a fair and objective evaluation of their multi-
faceted performance on the job. The evaluation results are also reflected in
the annual pay rate and promotion review based on job function and class in
accordance with the differential compensation scale.
Reflected in personnel management
(objective/rational discrimination)
Used as the basis for human resources development (HRD)
Competency measurement
Achievement measurement
Personality/ job aptitude
test
Manager leadership
survey
Compile & Analysis
Compensation & Fringe Benefits
Apart from its top level pay in the industry, Korean Air’s general wage spec-
trum is tied to the performance evaluation results. The company also en-
sures that its fringe benefits programs are practical to enhancing the quality
of life for all employees. Specifically, the company provides employees and
their families with airline tickets annually to help them enjoy their leisure
time and broaden their global insight. Other fringe benefit programs that
Korean Air offers to its employees include company housing, tuition support
for the children of employees, medical subsidies, support for leisure activi-
ties and post-retirement plans.
- Fair compensation scheme
- Introduction of annual pay and performance-oriented system
- Offers health insurance (KRW 38.25 billion in 2013)
- Provides financial support in case an employee or his/her spouse suffers from illness, accident or death
(KRW 1,830 million was paid in 2013)
- Covers full medical expenses (over USD2,000 for overseas layover crews and employees on business trips)
- Offers 25 to 35 airline tickets per year
- Provides 265 time-share condominiums at popular resorts in Korea
- Provides preferential discount vouchers for major hotels in Korea and abroad
- Supports activities of 28 social clubs within the company
- Provides company housing to 2,237 families
- Provides home loans
- Provides employees’ children with full tuition support through middle school, high school and college
- Provides tuition for children of employees attending prominent universities abroad
- Provides school tuition and language course tuitions for children of employees dispatched to international worksites
- Provides tuition for employees attending company-designated universities/graduate schools for work-related majors
- Subsidies to contribution to the National Pension Scheme (KRW 34.35 billion was paid in 2013)
- Provides KRW 50,000 every month in subsidies for employees’ personal pension plans (KRW 9.89 billion in 2013)
- Runs the nation’s largest corporate credit union while helping employees make equity participation in the union offering
substantial retirement pay (KRW 10.99 billion in 2013)
- contributions to the fund totaled KRW 55.13 billion in 2013
- Business performance incentives and safety incentives
38
SUSTAINING EXCELLENCEPEOPLE FOR EXCELLENCE
KOREAN AIR
2013 Fringe Benefits Performance
Category Description
Wages
Medical Support
Leisure Life Subsidies
Living Subsidies
Retirement Life
Subsidies
Incentives
Maternity Protection
In addition to the ‘baby break’ and flexible work time scheduling, Korean
Air goes one step further to maternity protection with such programs as
‘pregnancy break’ and occasional leaves for fertility treatment. The com-
pany provides childcare varying subsidies to employees with children under
the age of six and offers a child birth grant. Additionally, the Online SkyMom
class supports employees who may carry a child, undergo childbirth or be in
need of childcare.
Differences in Fringe Benefits Between Regular and
Non-regular Employees
Korean Air does not discriminate against non-regular employees. The com-
pany applies equal conditions and compensation, from basic salary and
performance incentives to safety allowances and other monetary compen-
sation. The same quality of benefits is offered to our entire workforce. How-
ever, some benefits that are based on the number of years in service, such
as personal pension premiums, insurance and loans, are applicable only to
full-time employees as these benefits come with long-term service.
39
2014 SUSTAINABILITY REPORT PEOPLE FOR EXCELLENCE
Cooperative Labor-Management Relationship
The promotion of harmonious labor-management relations leads Korean
Air to hold regular labor council meetings, and the company actively par-
ticipates in collective bargaining, including wage negotiation. Enacting or
amending regulations that can have impact on the employees directly or
indirectly sees the company organize a taskforce team with the labor union
for an open consultation for mutual, beneficial development.
Collective Agreement Coverage
Category 2011 2012 2013
Domestic full-time workers
Collective Agreement Coverage
(staffs below the managerial level)
Coverage Ratio
16,481
12,028
73%
16,953
12,734
75%
17,800
13,839
78%
(Unit: persons)
“ As a leading global carrier, Korean Air contributes
to heightening the national brand name of Korea
around the world. We also share our business
secrets with low-cost domestic airliners as part of
our win-win partnership project. The introduction
of state-of-the-art aircrafts will further enhance
customer satisfaction and efficiency in our service
and fuel costs, while enhancing our competitive edge
in the industry. At the same time, our keen sense of
responsibility in protecting the environment for future
generations motivates us to take on a proactive
campaign. At our core, an uncompromising dedication
towards safety underscores what we do as a
company.”
Park Myung-seok General Manager, Operations Planning Team, Operations Control Div. of Korean Air
Stakeholder Interview
Return to Work and Retention Rates Following Parental Leave
Category
No. of employees on maternity leaves
Return to work rate after maternity leaves
No. of employees on baby break
No. of employees on pregnancy leaves
No. of employees on parent leaves
One-year retention rate after
returning from baby break
Rate of male employees to female
employees on parental leaves
2011 2012 2013
527
100
712
231
481
77.7
0.8
691
100
1,064
452
612
76.0
1.6
709
100
1,038
476
562
76.0
1.1
(Unit: cases, %)
40
SUSTAINING EXCELLENCEPEOPLE FOR EXCELLENCE
KOREAN AIR
Specialized Training OrganizationHuman Resources Development Programs
Korean Air provides a number of training courses covering business man-
agement, job skills, and foreign languages for all ranks and positions as
well as specialized courses to foster invaluable, universal talent within
the company.
Our on-and off-line courses are designed to maximize the educational ex-
perience, and we also have specialized, competency-building programs for
locally-hired employees at overseas locations.
Korean Air HRD System
Professional Enhancement Training
Car
go
Mai
nte
nan
ce
Pas
senger
Cab
in
Flig
ht
Opera
tion
s
Management Training
ExecutiveKorean Air Executive Development
Program (KEDP)Executive Seminar
CES for DGM
Leadership ProgramKorean Air Value Pro-
gram
Global Expert Program
Global Manager Course
Global Manager Fostering Course
H.Q. Dispatch Program
CES* for GM
MBA
Airline Management School(AMS)
Korean Air Line-Manager Development
Program (KLDP)
Job Competency Enhancement Courses (Mandatory Online Courses based on Positions)
Manager
(M)
Team Manager
(TM)
Korean Air Team Manager Development Program (KTDP)
Team Manager Workshop
CES for M
CES for AM
Deputy Gen-eral Manager
(DGM)
General Manager
(GM)
Assistant Manager
(AM)
Staff
Airline Operations Basics
Company Orientation
Foreign languages
Service Training
Flight Crew Training Center
Maintenance Training Center
Cabin Crew Training Center
Shingal Training Center
● Management training● Online course● Service training● Passenger & Cargo service training
● Overseas training
Human Resources
Development Center
Man
ager
Cou
rse
Car
go s
ervi
ceC
argo
Enhan
cem
ent
Car
go
Adva
nce
d
Mai
nte
nan
ce
supe
rvis
ory
cour
se
Mai
nte
nan
ce
Enhan
cem
ent
Mai
nten
ance
A
dvan
ced
Pas
senge
r se
rvic
esP
asse
nge
r E
nhan
cem
ent
Pas
senge
r A
dva
nce
d
New
ly-a
ppoi
nte
d
TM
adva
nce
d
cour
seO
rien
tation
Top-
clas
s A
dva
nce
d
Cre
w C
hie
f C
ours
e
Ser
vice
Lea
der
ship
D
evel
opm
ent C
ours
e
Ser
vice
E
nhan
cem
ent
Cou
rse
Ser
vice
B
asic
C
ours
e
Ser
vice
Clin
ic C
ours
e
Engl
ish, J
apan
ese
, Chin
ese
, Russ
ian
and o
ther
langu
ages
Co-p
ilot P
rom
otio
n/Fr
eshm
anC
rew
Chie
f P
rom
oted
Adva
nce
d
Cou
rse
Pra
ctic
al C
ours
e
* CES: Communication Excellence School
41
2014 SUSTAINABILITY REPORT PEOPLE FOR EXCELLENCE
Training Programs by Job Function
Ground Operation | Korean Air’s career development plan (CDP) offers job
rotations, helping employees experience diverse job functions at home and
abroad while providing adequate training sessions to bring up competitive
global leaders.
Engineering | Korean Air’s specialized training programs and job rotation
helps its employees become top, industry experts in maintenance as spe-
cialized engineers and mechanics.
Cockpit Crews | Korean Air’s cutting-edge training equipment and ad-
vanced programs help employees grow into competent pilots ensuring safe
flights under all conditions.
Cabin Crews | Korean Air’s year-round mandatory service and special
training keep its cabin crews abreast of the most efficient manuals to guar-
antee the safety and comfort of customers.
Online Training Courses
Korean Air continues to promote its online training courses allowing employ-
ees to adjust their educational needs in accordance with their fluctuating
flight schedules at anytime. The quality educational content includes gain-
ing job-related knowledge, enhancing service mindset, global competencies
as well as foreign language courses with a curriculum compatible with offline
training programs.
Life-long Learning Programs
Since 2000, Korean Air has been operating the nation’s first technique uni-
versity, Jeongseok University, to support the life-long education of employ-
ees. Korean Air employees graduating this university are condoned with a
diploma authorized by the government and can transfer to other universi-
ties or advance to graduate schools with full tuition subsidy. The 13 classes
up until 2013 saw a total of 1,101 people receive diplomas.
Employee Training Facilities
Korean Air continuously invests in human resources development facilities
and programs. In 2014, a new training center is slated to open with an ac-
commodation of 300 people. The Flight Crew Training Center is also being
relocated to expand its size to 8,264.5m2 by 2016.
Reinforced Training for Locally-hired Global Employees
Korean Air supports its overseas branches with education and training, while
fostering regional, in-house service instructors for self-sufficiency in ser-
vice training in its overseas operations. Additionally, its educational portal
site reinforced the English service, providing as many as 290 materials in
English for international employees.
Category 2011 2012 2013
No. of courses
YoY Change
648
+68
799
+151
862
+63
Online Training Content Composition
Year
No. of trainees No. of traineesPer-employee training hours
Per-employee training hours
Male Female
2011
2012
2013
111
100
101
11,758
11,867
11,724
8,907
8,897
8,709
167
125
131
Per-employee training hours
NEXT STEP
GREENING FOREXCELLENCE
42
Modern aircraft technology has seen a reduction in noise pollution from its take-off and landing
by 75 percent compared to the historical first jetliners in the 1950’s. The fuel efficiency
also improved by 70 percent compared to the 1960’s. The aircraft technology has continued
developing over the past few decades to birth aircrafts that are faster, larger and safer, with
minimal impact on the environment. The ultimate goal of the aviation industry is to eliminate the
emission of carbons from its operations through improved technology and SOC infrastructure.
70% CO2 Emissions Reduction Rate
43
In 2011, Korean Air became Korea’s first and the world’s sixth airliner to introduce A380 aircrafts. Through
July 2014, the company has adopted ten A380s and plans on phasing in ten more B787-9 aircrafts starting
in 2016 as part of its fleet modernization plan for high-efficient, eco-friendly aircrafts. Specifically,
A380 has successfully cut down on noise creation by 37 percent from the conventional aircrafts with only
30 to 40 percent exhaust gas emission of the conventional aircrafts. Also, the B787 aircraft bodies are
mostly made of composite materials, enhancing fuel efficiency by at least 20 percent.
About the A380
44
While operating a systematic management system to reduce greenhouse gas emissions and energy consumption, we collaborate with the global aviation industry in addressing policies on worldwide carbon reduction.
Energy use / Emissions (atmospheric) / Climate change (global warming) / Products and services (environmental impact)
Environmental Issues
Environmental Management Strategies
● Compliance with relevant regulations
● Set an effective reduction target and carry out necessary tasks
● Manage GHG emissions focusing on business premises
● Active engagement with internal/external stakeholders
● Consistently carry out environmental campaigns
● Increase environmental education
● Standardization of environmental statistics
● Preventive emissions control
● Redefining contingency plans
Effective Reduction of GHG and Energy Use
Promotion of Communication Regarding Environmental
Activities
Promotion of Green Management
45
Global Afforestation Project (Unit: trees)
Kubuqi, China Baganuur, Mongolia
10,000
10,000
10,000
2011
2012
2013
78,100
79,000
78,880
2011
2012
2013
1,124,980Kubuqi, China
●
77,190Baganuur, Mongolia
●
CO2 Reduction (Unit: tCO2)
GHG Concentration Energy Use Reduction in Ground Operation
(Unit: TJ)
22.8
32.1
34.2
88.75kg_CO2e/100RTK
87.35kg_CO2e/100RTK
88.20kg_CO2e/100RTK
2011
2012
2013
2011
2012
2013
↑385,921
2011
419,417
2012
420,488
2013
↑
Energy Cost Reduction
KRW 636 million
Major Environmental Achievements
46
Korean Air’s Environmental Management Policies
The aviation industry gives priority to issues concerning jet fuel combus-
tion for flight operation and the resultant emissions of greenhouse gases
(GHG) and various environmental regulations including the emissions
trading system (ETS) that takes effect as of 2014. In joint response with
the global aviation industry, Korean Air seeks to minimize GHG emissions
and its impact on the environment. Continuing to enhance our company-
wide environmental management system ensures that our proactive en-
ergy reduction campaigns prove effective in cost savings, while making
diverse endeavors to minimize environmental risks.
Connecting every corner around the world, we appreciate the value of not only protecting but also applying our utmost care in minimizing any possible, negative impact there may be on the environment.
GREENING FOR EXCELLENCE
KOREAN AIR SUSTAINING EXCELLENCE
Korean Air Environmental Management System
● Guaranteeing EMS suitability, comprehensiveness and effectiveness
● Assessment of opportunity/risk analysis for continued improvement
● Monitoring & Measuring
● Compliance Review
● Internal/External Audit
● Correction and preventive measures
● Roles and responsibilities
● Eligibility/Education & Training
● Communication & Documentization
● Evaluation of Environmental Impact
● Review of Legal Requirements
● Plans for Acting Upon Environmental Goals
CEO Review (A)
Do (D)
Plan (P)
Check (C)
Ceaseless Improvement
Environ-mental Policies
Korean Air Environmental Management System
Marking the obtainment of the ISO14001 certificate in 1996, Korean Air
has consistently met necessary criteria. In accordance with the interna-
tional environmental management system standards, we have individual
EMS departments dedicated to company-wide EMS operations in all our
business activities, including the headquarters & general division, main-
tenance & engineering, aircraft manufacturing and catering center.
PROGRESSCONTEXT
47
2014 SUSTAINABILITY REPORT GREENING FOR EXCELLENCE
Input & Output
Resource Use (INPUT)
Type 20122011 2013 Change (%)
B-B
B-C
Gas/Diesel
Boiler Kerosene
By-product Gas No. 1
Gasoline
Jet Fuel
LNG
LPG
Total
16,333
263,349
296,657
466
21,722
11,283
33,314
272,442
7,485
923,051
15,814
262,658
281,864
17,130
18,345
11,399
42,409
249,978
7,339
906,936
0
243,815
252,705
304
15,818
10,861
43,072
257,974
3,901
828,450
-100.00
-7.42
-14.82
-34.76
-27.18
-3.74
29.29
-5.31
-47.88
-10.25
Direct Energy Consumption by Ground Operations (Unit: GJ)
* Direct/indirect energy consumption amount is monitored on 44 of our
business premises and assured by authorities under the Low-Carbon Green
Growth Act (PWC (2011~2012), KMAR (2013)).
Fuel Consumption by Flight Operations
20122011 2013 Change (%)
Jet Fuel 4,019,028 3,967,681 3,923,102 -2.39
(Unit: tons)
* Amount of jet fuel used for domestic and international flight operations
Environmental Management System Organization
Aircraft Manufacturing
Executives in charge
EMS Department
Head of Aerospace
Business Division
Business Planning Dept., Facility
Management Team
Chairman & CEO
Executive President & COO
Maintenance
Executives in charge
EMS Department
Head of Maintenance
& Engineering Division
Maintenance Planning Dept.,
Facility & Equipment Team
Headquarters & General
Executives in charge
EMS Department
Environment & Construction Management Department Executives.
Environment & Construction Management
Dept., Environment Team
Catering
Executives in charge
EMS Department
Head of Catering & In-Flight Sales
Division
Catering Quality Control Team
Certification
Initial Acquisition Date
Latest Renewal Date
Agency
Coverage
ISO14001
December 13, 1996
November 17, 2011
BSI (British Standards Institution)
All operations: Headquarters operation
(flight operations, transportation, cabin, strategic
support); maintenance; catering; aircraft
manufacturing
* Hotel operation is excluded following the
spin-off as of December 2013.
Environmental Management System Certification
48
SUSTAINING EXCELLENCEGREENING FOR EXCELLENCE
KOREAN AIR
CO2
CH4
N2O
CO2e
64,723
0.760
0.370
64,854
63,912
0.731
0.365
64,041
62,643
0.738
0.357
62,769
-3.21
-2.89
-3.51
-3.21
Environmental Pollutant Emissions (OUTPUT)
Type 20122011 2013 Change (%)
CO2
CH4
N2O
CO2e
60,960
3.287
1.436
61,474
60,315
3.236
1.452
60,833
55,532
2.684
1.372
55,536
-8.90
-18.34
-4.45
-9.66
Type 20122011 2013 Change (%)
CO2
CH4
N2O
CO2e
12,662,272
18
403
12,780,177
12,186,003
18
387
12,306,351
12,361,107
18
393
12,483,403
-2.38
0.00
-2.48
-2.32
Type 20122011 2013 Change (%)
GHG (Scope 1) Emissions by Flight Operations (Unit: tons)
GHG (Scope1) Emissions by Ground Operations (Unit: tons)
GHG (Scope2) Emissions by Ground Operations (Unit: tons)
* Greenhouse gas inventory applies Tier 2 IPCC 2006 National Greenhouse
Gas Inventory Guidelines.
* CO2e is the sum of emissions of CO2 equivalents of CH4 and N20.
Type 20122011 2013 Change (%)
Total Amount of Water
Intake
Recycled Amount
Recycling Rate
1,514,530
27,519
1.82
1,500,600
24,624
1.64
1,250,341
27,000
2.16
-17.44
-1.89
18.84
Water Use (Unit: tons)
* Total amount of water intake includes the use of the water supply,
water recycling and underground water. Billing statements issued by water
suppliers allows for calculation of intake.
* The recycled amount includes the amount of recycled water used at the
Gimpo Korean Air Building.
Indirect Energy Consumption by Ground Operations
Type 20122011 2013 Change (%)
Electricity & Hot Water 1,335,7341,248,506 1,292,780 -3.22
(Unit: GJ)
* Electricity and hot water consumption were calculated based on Scope 1
and 2 while excluding Scope 3. Boundaries are the same as those for GHG-
emitting operations listed in the target management system.
* Electricity and hot water consumption were monitored in accordance
with the guidelines of the Low-Carbon Green Growth Act and assured by
authorities (PWC (2011~2012), KMAR (2013)).
49
2014 SUSTAINABILITY REPORT GREENING FOR EXCELLENCE
Dusts
THC
NOx
SOx
SO2
BOD
COD
SS
T-N
T-P
23
16.19
67,379
9
3,977
25.572
19.182
38.904
4.722
0.745
21
16
64,732
10
3,843
20.978
14.959
30.189
3.434
0.570
23
20
65,755
7
3,900
39.677
39.518
43.436
5.282
1.000
0.00
23.53
-2.41
-22.22
-1.94
55.16
106.02
11.65
11.86
34.23
Type
Type
2012
2012
2011
2011
2013
2013
Change (%)
Change (%)
Air Pollutant Emissions (Unit: tons)
Water Pollutant Emissions (Unit: tons)
* Air pollutant emissions are the sum of the pollutants generated from flight
operations and six major sources of air pollutants: Incheon Maintenance &
Engineering Division (A), Korean Air Building at Gimpo, Engine Assembly
Line in Bucheon, Component Repair Plant in Bucheon, Seoqwipo KAL Hotel,
and Gimhae Tech Center).
* The amount of ozone depletory substances has not been measured since
2008 as they are of a negligible amount.
* Water pollutant emissions are the sum of the pollutants generated from
wastewater effluent from the eight wastewater treatment facilities
in Korean Air Building and Catering Center in Gimpo, Limousine Service
Center, Engine Repair Plant in Bucheon, Incheon 1st Cargo Terminal,
Incheon Catering Center, Incheon Maintenance & Engineering Division
(A), and Gimhae Tech Center.
Incineration
Landfill
Recycling
Total
13,332.65
868.63
9,834.29
24,035.57
12,209.90
743.57
9,481.28
22,434.75
13,982.74
641.08
10,326.24
24,950.06
5.84
-26.20
9.27
6.09
Type 20122011 2013 Change (%)
Waste Emissions (Unit: tons)
* The sum of waste amount is the amount outsourced for treatment and
disposal from January 1 to December 31, 2013.
* Waste Amount disposed of with biodegradable plastic garbage bags
is excluded.
* Jeju KAL Hotel is excluded from the sum of waste emissions starting in 2013.
* Emissions concentrations are percentage vs. legal limits.
Dust
THC
NOx
SOx
24.6
14.4
41.6
17.6
24.4
17.3
43.3
15.2
23.8
17.2
41.0
12.4
Type 20122011 2013
Emissions Concentration
Air
BOD
COD
SS
T-N
T-P
12.1
20.2
16.9
14.1
10.0
11.0
19.4
17.6
14.5
9.3
12.8
18.7
13.1
14.0
11.5
Type 20122011 2013
Water
(Unit: %)
50
SUSTAINING EXCELLENCEGREENING FOR EXCELLENCE
KOREAN AIR
Climate Change and Its Impact on Aviation Industry
Climate change presents both risk and opportunity to the global aviation in-
dustry. Being the main culprit to the increased frequency of natural disasters
such as typhoons and hurricanes, it results in the shutdown of airports, de-
layed flight schedules and even flight cancellations. The extended ground
standby duration therefore ultimately undermines the efficiency of fleet
operations, giving rise to additional costs. Decreases in passenger flights to
given destinations having been influenced by natural disasters can directly
affect our business and sales revenue as well. Moreover, regulations against
climate change also pose risks to the aviation industry.
On the other hand, the same climate change can also bestow a number of op-
portunities. The efforts to enhance fuel efficiency leads to cost savings, while
complying with GHG regulations often encourages maximum fuel efficiency
as well as strategic purchase of cheap carbon credits, which in turn boost the
company’s competitive edge in the industry. In addition, our efforts concern-
ing the development of cutting-edge aircraft technology, introduction of the
latest operational systems and development of biofuel will also present new
opportunities for the aviation industry. In fact, the aviation industry has re-
mained loyal to the cutting down of their impact on the environment over the
last one hundred years. As a result, the per-seat kilometer of carbon emission
from modern airplanes is 70 percent lower than those in the 1960s and air-
craft noise has been reduced by 75 percent following the commencement of
the first jets taking to the skies in the 1950s.*
Korean Air’s GHG Management Strategies
In 2013, Korean Air consumed a total of 1,302,543,587 gallons of fuel to oper-
ate its flights over the year, emitting a total of 12.36 million tons of greenhouse
gas for the same period. The company has applied a variety of efforts to re-
duce its GHG emissions, including its voluntary agreement with the Korean
government and the adoption of the GHG Target Management program lead-
ing to the successful reduction of its GHG emissions by 420,000 tons in 2013
compared to the previous year.
Committed to reducing its GHG emissions from flight operation, Korean Air has
instituted systems for more efficient management of its fuel costs accounting
for 40 percent of its operational expenses. This is essentially part of its new
eco-friendly management strategy to protect the environment by reducing
its GHG emissions.
2011 2012 2013
Economic Flight Procedures
Performance Enhancement
Flight Planning
Weight Management
Total
150,649
91,240
119,423
24,609
385,921
144,658
98,249
156,769
19,741
419,417
136,125
95,097
156,822
32,443
420,488
GHG Emissions Reduction Performance (Unit: tCO2)
Efficient Fuel Management Strategies
Improving flight efficiency through
analysis of fuel consumption
patterns
Cost savings
through efficient fuel
consumption
Improving the environment
through reduced GHG emissions
* Sources: IATA website at http://www.iata.org/pressroom/speeches/
Pages/2012-06-28-01.aspx
51
2014 SUSTAINABILITY REPORT GREENING FOR EXCELLENCE
Korean Air Fuel Management System
Performance management
● Using more economical ground
equipment while parking● Water-washing inside the engines● Restoring outward appearance of
fan blades of engines● Enhancing fuel efficiency by installing
winglets on B737 aircrafts
Weight Management
● Optimal loading of potable water● Increasing accuracy of estimated
payload ● Use of lighter containers● Refraining from overload of jet fuel
Flight Planning
● Developing nearest alternate airports and
shortcut routes● Smart revision of fuel loading regulations● Loading fuels based on statistics of fuel
consumption patterns● Planning optimal flights based on the Flight
Operations Quality Assurance (FOQA)
Operational Management
● Minimal use of reverse thrust while
landing● Taxiing with single engine after landing● Optimal flight speed in consideration
of fuel costs● Optimal use of flaps while take-off
and landing
FLIGHT PLANNING
FLIGHT OPERATIONMAINTENANCE
AIRPORT
Weight
Opera
tions
Flight plan Per
form
ance
Correlated Management
“ Reducing greenhouse gas emissions has become
a global issue, especially for the global aviation
industry. It is an issue in which a preemptive response
is essential as regulations such as the Emissions
Trading Scheme(ETS) take effect as of 2015 inviting
enormous investments and costs of eco-friendly
policies. Accordingly, we ask Korean Air to cooperate
with the Incheon International Airport Corporation in
its consistent efforts to minimize the GHG emissions
from its aircrafts. It is also recommended to adopt
the Energy Management System in order to spur
on a company-wide energy saving initiative. The
CEO’s commitment and stronger governance in the
adherence to these eco-friendly policies is critical to
the success of these measures.”
Lee, Su-hong Team Manager of Energy & Environment Division, Incheon International Airport Corporation
Stakeholder Interview
to further curtail the GHG emissions with significantly lighter weight and bet-
tered engine performance employing state-of-the-art materials for the fu-
selage and wings. Korean Air plans a total of 50 new passenger planes and five
new cargo planes by 2018.
Production of Sharklets for A320 Series Exceeds 1,000
Stretching beyond the domain of air transport operation, Korean Air
also builds upon its reputation as a leading global aircraft component
manufacturer. Its particular focus lies on manufacturing eco-friendly
aircrafts using light-weight, strong composite materials. In February
2013, the company manufactured the 1,000th Sharklet—a component
of the wings for the A320 series that it has been supplying to the Air-
bus since 2012. With more than 80 percent of its parts, including the
surface, made of the cutting-edge composite materials, A320 Sharklets
are light, fortified aircrafts on top of being eco-friendly following con-
tinued improvement of fuel efficiency by more than 3.5 percent through
reducing air resistance on the wingtips. As a result, 3,600 tons of carbon
emissions are saved annually per aircraft. Korean Air aims to earn more
than KRW 400 billion from the sale of this product by 2017.
52
SUSTAINING EXCELLENCEGREENING FOR EXCELLENCE
KOREAN AIR
Aircraft Payload Control
Starting in 2013, Korean Air began applying more efficient fuel management
measures tapping into the close collaboration between the operational divi-
sions of each business—flight operation, cabin and catering services. Each
division controls the estimation of the payloads (passengers + luggage +
freight + postal matters) of passenger and cargo planes influencing opera-
tional weight control. Extra points are given according to the accuracy in the
calculation designed for narrowing the margin of error of the payload estimate.
Scientific and Efficient Flight Planning
Korean Air is the first airliner taking advantage of the advanced technology
and accumulated database of FOQA (Flight Operations Quality Assurance)
and FFS (Flight Following System) in its flight planning for higher efficiency
of fuel consumption. These systems analyze the routes, altitudes, speeds and
fuel consumptions of the aircraft to accurately reflect the scientific data in
planning the flights allowing for safer, more enjoyable flights as well as im-
proved efficiency of fuel loading.
Developing Economic Routes
Developing new routes or discovering shortcuts for existing routes also help
us reduce fuel consumption and CO2 emissions. Korean Air began operation
of the new shortcut passing through Sapporo and Eastern Gangwon for the
Incheon-western U.S. route and for the Incheon and Hokkaido region route
as of November 14, 2013. The shorter route connecting the two neighbor-
ing Northeast Asian countries of was approved by the bilateral agreement
and the support of the Korean Ministry of Land, Infrastructure and Transport
(MOLIT) after Korean Air brought the agenda before the Korea-Japan ATC
Operation Working Group Meeting. The new route shortened the flight dura-
tion by an average of four minutes per flight, saving approximately 2,000 tons
of GHG emissions annually.
Adopting High-efficient New Aircrafts
Korean Air became the first Korean airliner to adopt the highly fuel-efficient
A380 aircrafts transporting 35 percent more passengers than conventional
aircrafts, thereby reducing GHG emissions by more than 10 percent. Slated
to be delivered in 2015, the Bombardier CS300 aircraft is greatly anticipated
Efforts to Reduce Aircraft Noise
Aircraft Noise Regulatory Trends
The International Civil Aviation Organization (ICAO) first introduced noise
regulations in 1969 and has continuously raised the intensity of its regula-
tions. All civil aircrafts in operation are mandated to abide by Chapter 3 stand-
ards and all aircrafts approved from 2006 should meet the criteria as provided
by Chapter 4 standards. Domestic regulations concerning noise emissions are
applied at Gimpo Airport (12 compliance offices since 2008), Gimhae Airport
(9 compliance offices since 2013), and Jeju (5 compliance offices since 2014).
Korean Air’s Aircraft Noise Level
Korean Air strives to minimize noise emissions from its aircrafts by adopt-
ing state-of-the-art aircrafts such as A380 and B747-8. According to the
ICAO’s Annex 16 provisions, aircrafts with a noise level of at least 10 EPNdB*
53
2014 SUSTAINABILITY REPORT GREENING FOR EXCELLENCE
Noise Abatement Departure Procedures
Committed to minimizing the noise emissions in nearby communities, Korean
Air develops various noise abatement departure procedures, including the
NADP 1* and 2* as recommended by the ICAO. Furthermore, its corporate
bylaws stipulate that all aircrafts should abide by the NADP 2 in order to mini-
mize fuel consumption and reduce GHG emissions.
lower than Chapter 3 standards are classified as Chapter 4. All Korean Air
aircrafts satisfy the Chapter 4 standards.
* EPNdB (Effective Perceived Noise Level in Decibels) is a unit of
measuring aircrafts’ noise level calculated by weighing in the particular
frequency perceived as excessive before adjusting it with the duration
and spontaneous variance of frequency and intensity.
* NADP 1 is intended to provide noise reduction for noise-sensitive areas in close
proximity to the departure end of the runway. This procedure involves a reduction
in power or thrust at or above a prescribed minimum altitude (457m) and a delay
in the retraction of flaps/slats and acceleration until a prescribed maximum
altitude (914m) is attained.
* NADP 2 provides noise reduction to areas comparably distant from the departure
end of the runway. After using a prescribed thrust for the initial climb at take-
off, the aircraft retracts the flaps and reduces the thrust as it reaches the
prescribed minimum altitude (305m). Afterwards, it accelerates to a climbing
speed as soon as the aircraft reaches an altitude of 914m.
Enhanced Fuel Efficiency by Using Cutting-edge Composite Materials and
High-Performance Engines
● Approximately 40 percent of fuselage and components are made of cutting-edge
carbon fibers reinforced composites and high-end metal substances.
● Fuel consumption and noise and toxic gas emissions are reduced with the GP7270 engine.
● Less than 3 liters of fuel are consumed, to transport one passenger 100 kilometers,
similar to that of a compact car
Eco-friendly Features of New Aircrafts
A380
Eco-friendly, Next-generation Aircraft Employing Light-weighted Carbon
Composite Materials and Cutting-edge Engine Technology
● More than 50 percent use of fuselage made of cutting-edge composite materials has
brought significant improvement in fuel efficiency with reduced emissions of exhaust
gas and noise.
● The maximum distance of flight reaches as much as 15,750km with an accommodation
of 250 to 290 seats.
● Aircrafts are equipped with a self-health monitoring system connected to computer
systems on the ground
B787-9
Chapter 3
1992 19961994 1998 20022000 2004 2006 20102008 2012 2014
0
-5
-10
-15
-20
-25
-30
Chapter 4
◆
▲▲
▲
●
●
●
◆
■■
■■
■777-300
737-800W (Winglet)
747-400ERF777-300ER
737-900ER
747-8F
A380-861
777F
747-400P
777-200
A330-300737-900
A330-200
◆747-400P
YEAR OF INTRODUCTION
EPNdB
Aircraft Noise Level
54
SUSTAINING EXCELLENCEGREENING FOR EXCELLENCE
KOREAN AIR
Local Air Quality
Initiative GHG reductions
(tCO2eq)
No. of cases
Investments (KRW in millions)
Energy (TJ)
Saved expenses
(KRW in millions/year)
Replacement with high-efficient facilities
Air conditioning/heating temperature
Facility improvement
Operational innovation
Total
248.4
812.5
105.7
467.1
1,633.7
3
9
2
11
25
9.5
-
-
-
9.5
5.1
17.6
2.2
7.3
32.1
2.5
393.7
3.2
236.6
636.0
Energy Saving in Ground Operation for 2013
LTO NOx emissions
2011
2012
2013
66,392
67,316
65,690
(Unit: tons)
Multi-Collaboration with Incheon Int’l Airport Corporation on Eco-friendly Airport
Korean Air concluded an agreement with the Incheon International
Airport Corporation (IIAC) on energy conservation and GHG emis-
sion reduction within the airport in November, 2013. In recognition
of the seriousness of the climate change and the nation’s energy
crisis, 11 operators, including Korean Air, took the opportunity to
sign up for the initiative. The signatories are recommended to take
voluntary initiatives to cut down on their energy consumption by at
least 1 percent annually and will be involved in promotion and edu-
cation activities to raise the public recognition of these initiatives.
Protecting Species at Risk
Korean Air faithfully abides by all related international regulations
and agreements on air cargo transportation and proactively sides
with protecting the environment. In 2013, the company announced
its decision to ban the carriage of shark fins on its cargo flights in
participation of the global initiative of protecting sharks that was
classified as a species at risk by the Convention on International
Trade in Endangered Species of Wild Fauna and Flora (CITES). Ko-
rean Air submitted the regulation of this particular ban and related
products to LAR (Live Animal Regulations) through IATA (Interna-
tional Air Transport Association) and will continue to participate in
various movements to protect the global ecosystem.
Recycling vs. Incineration/Landfill
2012 2013
● Recycling ● Incineration/landfill
59.1%40.9% 58.6%41.4%
↑
2014 Environmental Campaign
55
2014 SUSTAINABILITY REPORT GREENING FOR EXCELLENCE
2014 Environmental Management
Compliance with and Preemptive Response to Environmental
Regulations
● Compliance with domestic and international regulations on GHG
emissions by air industry
● Preparing preemptive responsive systems to new environmental
regulations (domestic ETS and Chemicals Control Act)
Expanding Communication on Environmental Issues
● Expanding communication with internal/external stakeholders
● Standardizing environmental performance indicators and continuing
with environmental protection campaigns
Reinforcing the Environmental Management System
● Increasing check/measurement of pollutants
● Reinforcing competencies of environmental department staff
● Realigning contingency plans of responding environment-related
emergencies
Mending Fuel Management Policy and Developing GHG
Reduction Technology
● Active R&D on new GHG reduction technologies
● Information-Sharing with international organizations and meeting
international norms/standards
2014
Economic Flight
Performance Enhancement
Flight Planning
Weight Management
Total
136,736
88,754
154,005
27,398
406,893
2014 CO2 reduction Goals (단위:tCO2)
Annual Drawing Contest for Children
Korean Air hosts drawing contests for children every year on the
subject of “Drawing My Own Dream Airplane”. The seventh event
in 2014 is planned to awaken future generations to the importance
of protecting the environment. Every year, we wrap the grand
prize-winning paintings around the fuselage of our aircrafts, pub-
licly announcing our commitment to harmony between the aviation
industry and the environment encouraging an enrichment of the
importance of human life.
NEXT STEP
VALUE FOR EXCELLENCE
“Safety First” was the nickname of the first historical airplane in 1914 that flew the
first paid passenger. This speaks volume of how dedicated that first commercial airliner
was about safety—the timeless overarching value of the aviation industry.
In fact, the aviation industry has committed their energy to the safety and security
of passengers for the past 100 years and has evolved towards a more superior
standard of convenience and comfort for passenger satisfaction.
Safety First
SAFETY FIRST
56
57
The year 2013 marked Korean Air’s being accident-free for its fifteenth year. Furthermore, Korean
Air ranked atop the global customer satisfaction index (GCSI) for its ninth straight year and was also
named head of its class - by several CSI surveyors, including the KCSI (Korea Customer Satisfaction
Index) and KS-SQI (Korean Standard-Service Quality Index) in the same year. As such, Korean
Air holds its sights upon reaching higher level of customer satisfaction with investments in safety-
related infrastructure, fleet modernization, VOC collection and customer service improvement.
The First GCSI
58
Korean Air consistently earns several high marks in customer satisfaction surveys with remarkable punctual performance and an accident-free record.
Increased demand for stability of products & services / Customer health and safety / Product and service labeling (customer satisfaction) / Diversified customer needs / Growth in number of customers valuing health, eco-friendliness and pro-social behavior
Customer Service Issues
● Operating Safety Management System (SMS)
● On-Time Rate of 99.86 percent (Average on-time rate of global carriers: 98.91 %)
● Maintaining IATA Operational Safety Audit (IOSA) certification
● Reflecting voice of customers (VOC) in management plans (approximately 60,000 VOCs annually)
● Improving quality of customer service through ‘Service Forum’
● No. 1 in aviation category of the Global Customer Satisfaction Index (GCSI) for ninth consecutive year in 2013
● No. 1 in aviation category of the Korean Standard-Service Quality Index (KS-SQI) for second straight year in 2013
● Operating established customer healthcare and first aid system
Korean Air’s effort towards higher customer satisfaction
59
* NCSI: National Customer Satisfaction Index, GCSI: Global Customer Satisfaction Index, KS-SQI: Korean Standard-Service Quality Index,
KCSI: Korean Customer Satisfaction Index
External Survey Results of Customer Satisfaction
No. 1 in KS-SQI, NCSI and GCSI in 2013
No. 1 in KS-SQI, KCSI and GCSI in 2012
No. 1 in NCSI and GCSI in 20112011
2012
2013
Average fleet age (years)
2011
2012
2013
9.9
9.5
9.3
Major Customer Service Achievements
Accident-free operation for
15 years
SAFETY FIRST
Medical Aids to Invalid Passengers2
,80
5 p
ers
ons
3,4
65
pers
on
s
3,2
60
pers
ons
2011 2012 2013
What Customer Satisfaction Means to the
Aviation Industry
The aviation industry has contributed to improving the quality of life by
promoting the freedom of movement. Today, anyone can travel, do busi-
ness and trade across borders by air. Accordingly, the quality of in-flight
service has grown and diversified. The number of traveling destinations
has doubled over the past decade and people either demand quicker and
smoother transits or direct flights to their final destinations.
The safe and secured transport of passengers and cargoes, the conveni-
ence and agreeability of flights and various other customer services are
basic assets of the aviation industry. Enhancing customer value, as it has
always been for the past century, leads to the evolution of not only the
aviation industry but also civilization.
The industry is thus propelled to improve systems and infrastructure to
achieve faster and more convenient, yet safer travel, connecting the
world. Korean Air is also a big proponent of this initiative.
Safety Policy
At Korean Air, safety policies reflect its
strong commitment to a safety-first
operation and the strategic direction of
a ‘first-class’ safety management. Eve-
ryone at Korean Air is on the same page
on this ‘safety-first’ policy and pro-
fusely exhibits concerted efforts toward
promoting safety practices within the
workplace while seeking excellence in its
operational system and customer service
through safety and quality-oriented, innovative corporate culture.
Korean Air proudly
contributes to enhancing
the value of aviation service
and international exchange
as well as customer
satisfaction.
VALUEFOR EXCELLENCE
KOREAN AIR SUSTAINING EXCELLENCE
Korean Air’s safety policy underpins the company’s compliance with na-
tional laws, regulations and procedures as well as the preparation and
practice of safety management. Therefore, all regulations, procedures
and manuals should correspond with the company’s safety policy.
The Safety & Security Division of Korean Air reviews domestic and in-
ternational recommendations and employee suggestions every two years
to maintain an up-to-date safety policy. The latest revision was made in
July 2014 to articulate the company’s responsibility and employees’ re-
sponsibility to maintaining the highest possible safety and security level
companywide, reiterating the employees’ role in company-wide safety
practices.
Safety Management Organization
The Korean Air Safety & Security Division is under the direct control
of the chief operating officer(COO) to facilitate company-wide safety
management and efficient, systematic safety control. In addition, the di-
vision’s chief executive directly reports to the COO for independent and
fact-based reporting on safety issues to head management.
60
Safety Committee & meeting
Central Safety Committee ● Deliberates on and approves master safety
plans
Presided over by to management
Executive Action Council ● Decides regulations/procedures relating to
safety● Decides projects and investment plans relating to safety
Operational Division Heads
Monthly Safety & Security Meeting ● Analyzes abnormal flight operations and
develops prevention measures● Inter-departmental cooperation to address pending issues
Divisional Team Leaders
PROGRESS
CONTEXT
61
2014 SUSTAINABILITY REPORT VALUE FOR EXCELLENCE
Safety Management System for Safe Flight
Operation
Korean Air is establishing an advanced safety management system (SMS)
that focuses on integrated and preemptive measures. Completed in 2009,
the company-wide safety management IT system, SafeNet, underpins the
company-wide integrated safety control.
In 2013, the Action Log system was additionally developed, allowing effective
control of potential hazards that can hinder operational safety.
Safety Quality Assurance
IOSA (IATA Operational Safety Audit) Certification
● Korean Air satisfies the 900 safety criteria of this safety assessment pro-
gram developed by the IATA and has been renewing the certification through
the biennale renewal inspection since 2005.
Safety Management System (SMS)
Documentization
Thorough
management of
diverse safety
hazards
Analysis
Safety hazard
assessment and risk
prioritization
Risk countermeasures
Notification to
officers in charge of
safety measures
Safety hazards collection methodology
Responsive Measures- Report on outbreak of
event- Inspection report
Preventive Measures- Voluntary report on safety
issues - Safety check - Safety related surveys
Anticipatory Measures- Operational data analysis:
FOQA- First-hand observation
system: LINE SAFETY AUDIT
Safety guarantee through feedback/ quality control/ quality assurance
Management
Allocation
by responsibility
Risk reassessment
Safeguards
implemented
Usage of safety information
Introduction of
Safety Council
Safety bulletin board
Safety trend analysis
Distribution of reports
Seminars or workshops
Saf
ety
haz
ards
ISAGO (IATA Safety Audit for Ground Operations)
● Korean Air satisfies the safety criteria of this program and monitors its sup-
pliers to meet the criteria. As a member of the ISAGO Pool Advisory Group,
the company proudly contributes to the standardization of the international
safety criteria and the improvement of safety practice and operational quality
of all ground handling suppliers around the world.
Airlift Transportation Program of the U.S. Department of Defense
● Korean Air holds this certification recognizing it as safe air carrier by the U.S.
Department of Defense and has been receiving renewal examinations every
two years since August 2001.
Anti-terrorism at Korean Air
Recently, terrorist attacks on aircrafts tend to set their targets on those that
can put terrorists in global spotlight. We have no way of knowing who or where
the next incident will occur. Therefore, Korean Air takes the following preventive
measures to protect its passengers and aircrafts in such critical circumstances.
● Monthly updating security information of destinations and regularly updat-
ing security checks at its service airports
● Establishing responsive network by sharing information with local branches,
related departments and related national security authorities
● Keeping abreast of international security trends by attending related inter-
national conventions
● Providing security education to local staff and running drills simulating in-
flight emergencies
● Preparing manuals and security devices for responding crises in the event
of in-flight emergencies
62
SUSTAINING EXCELLENCEVALUE FOR EXCELLENCE
KOREAN AIR
Voice of Customers (VOC)
Korean Air embraces the ‘voice of the customer’ and as so, it is reflected in
major management policy. VOCs are instrumental in controlling our service
quality at the point of contact with customers. Customers can submit an e-
mail in any of the ten languages available on the global website of Korean
Air. To date, approximately 60,000 cases of compliments, complaints, sug-
gestions or inquiries are directed to the company and each voice has been
reflected in its management policy.
Our Efforts to Enhance Customer Service
Set up of the Service Standards Dept. in 2013
In 2013, Korean Air established the Service Standards Department as part of
its customer satisfaction management setting the company-wide guidelines
on all services, including reservation & ticketing, airport service, cabin & ca-
tering services. Also, it coordinates and improves the gaps and irregularities
in the quality of services among divisions so as to establish an all-encom-
passing companywide service.
Drills to prevent and respond to hijacking
Drills to respond to security risks
Drills with armed security guards on board
In-flight Emergency Simulation
Drills
Service Improvement
VOC DB
Case-by-case handling of customer complaints
FEEDBACK
Follow-up improvements to policies and procedures
MONITORING
Fact-finding and monitoring
63
2014 SUSTAINABILITY REPORT VALUE FOR EXCELLENCE
Compliments
Complaints
Suggestions
Inquiries
Others
Total (YoY)
4,812
4,789
1,051
50,215
4,520
65,439
4,040
3,693
1,489
44,658
4,327
58,207
6,637
4,124
629
48,787
1,941
62,118
+38%
-14%
-40%
-3%
-133%
-5%
20122011 2013 Change (%)
VOC Case Breakdown
* Others: overlapping cases or damaged luggage reports
“ Korean Air commands unparalleled competitive edge
over its domestic rivals when it comes to in-flight &
catering services. However, they are also emerging
recently with various strategic differentiations. It
seems the time has arrived for Korean Air to produce
its own growth strategies further distinguishing
itself from the pack. I would recommend maximizing
customer satisfaction through differentiating prices
according to reservation timing, or a competitive-
pricing policy on economy seats. Given the structural
weakness of domestic airliners, Korean Air can
take advantage of its in-house MRO technology &
infrastructure in its CSR activities, contributing
on social scale as well.”
Ryu In-chool Director, Business Development of Daum Communication
Stakeholder Interview
(Unit: cases)
Customer Healthcare
Medical Support to Invalid Passengers
● Providing medical equipment and top-quality medical services, including
medicinal oxygen and stretchers according to medical specialists’ advice
Preparedness for In-flight Emergencies
● Cabin crews are trained on in-flight first aid services for effective and timely
responses
● Aircrafts carry first aid kits and medical equipment
● Round-the-clock Emergency Medical Call System (EMCS) on ground operation
Other In-flight Health & Safety Management
● Untimely breathalyzer check on cockpit crews, aircraft maintenance techni-
cians, flight controllers and cabin crews
● Monitoring state of worldwide contagious diseases & mobilizing responsive
networks in event of an outbreak of an infectious disease
64
SUSTAINING EXCELLENCEVALUE FOR EXCELLENCE
KOREAN AIR
Company Webzine
Korean Air publishes the monthly webzine, Service Bulletin, as a company-
wide communication organ. September 2006 marking the publishing of the
first issue eventually saw the arrival of the 138th issue in May 2014. Its wide
array of contents, ranging from the case studies on customer complaints, em-
ployees with excellent service records and introductions to the latest trend
in the service industry to service tips and tales of being out on the field guide
employees with practical tips for customer service.
Service Excellence
Korean Air rewards employees showing outstanding records in customer ser-
vice with the Service Excellence Award and motivates them to continue fur-
thering their efforts. In 2013, a total of 26 employees were awarded and were
the recipients of a monetary reward.
Service Forum
Korean Air classifies all communication data with customers into categories
for integrated management. Vital complaints or suggestions to the business
are posted on the company’s bulletin board for expansive sharing ensuring
that everyone is on the same page about the quality of service. Some particu-
lar repetitive complaints are classified as tasks for improvements and become
subject of round-the-clock monitoring to analyze potential causes and solu-
tions. This approach proved effective in improving the quality of service.
Service Forum
Service Forum (Bulletin Board)
● Understanding the contact point of customers
● Improvement to customer service & response
FEEDBACK
REPLY
Improvement to policies & procedures
Analysis of customer needs
VOC System
(Automated
classification by type
and reply)
KOREAN AIR
CUSTOMER Significant
Complaints &
Compliments
Shared
Long-Term Growth Strategies in Customer Service
Reinforcing brand image with absolute safety control and premium services
Securing market leadership and continuously enhancing profit-ability through enhanced marketing activities
Emerging as privileged airliner
by 2019
65
2014 SUSTAINABILITY REPORT VALUE FOR EXCELLENCE
In-flight Meal Service—a Critical Factor to the Joy of Travel
Since its adoption of Bibimbap in 1998, Korean Air has been intro-
ducing a variety of Korean traditional dishes to the in-flight catering
menus, such as Bibim-kooksoo (spicy noodle), Samkyetang (Korean
ginseng chicken soup), Gori Komtang (ox tail soup), Kondre Rice,
Kalbijjim (beef short ribs), Dongchimi-kooksoo (cold noodle soup
made with dongchimi), and Yongyangbap (high nutrient rice). These
menus have been well-received by Koreans with a taste of home
and by international passengers as a form of health food. These at-
tempts were highly recognized by the Mercury Awards, awarding
Korean Air the in-flight meal prize in 1998 and 2006. Furthermore,
the company offers a number of premium wines selected from the
service destinations.
The New Passenger Service System (PSS) Kicks in in 2014
Korean Air’s new passenger service system (PSS) that it has been
developing since 2011 finally became official this year. Based on the
world’s leading air travel service provider, Amadeus’ Altea system,
the new system will significantly improve the entire reservation pro-
cess in addition to ticketing and travel, thereby reducing the check-in
procedures and durations, which are highly expected to allow effec-
tive analysis of customer information for improved quality of service
and effective marketing.
Fleet Age Control
Fleet age control is correlated to the quality of service as well as customer
safety. It is also critical to Korean Air’s eco-friendly operational policy. The
company has been consistently replacing its old fleets with safer and more
eco-friendly aircrafts for years. As a result, its average fleet age lowered from
9.5 years in 2012 to 9.3 years in 2013—the lowest among global airliners. The
company continues to look ahead strategically modernizing its fleet, disposing
old crafts and introducing the latest aircraft models.
Industry-Leading On-Time Performance through
Air-tight Aircraft Maintenance
Korean Air carries out in-house operations of aircraft maintenance, such as
checking aircraft before and after flights, periodical check-ups, and upgrad-
ing in-flight entertainment systems as well as renovation and painting of the
fuselages. Committed to safe flights, we strictly observe prior and post-flight,
plus periodic check-ups. We ultimately recorded an on-time performance of
99.86 percent in 2013—0.95 percentage points higher than the global aver-
age of 98.91 percent.
* On-time Performance (or, Dispatch Reliability) shows the reliability
of aircraft schedule adherence. It is the ratio of the number of
flights delayed due to technical faults in the total number of flights,
usually expressed as a percentage of paid flights.
NEXT STEP
HARMONY FOR EXCELLENCE
The history of air transportation originated in the partnerships between the industry’s pioneers-Percival
Fansler, an entrepreneur who commercialized the aviation technologies, Thomas Benoist, an aircraft
manufacturer, and the historical first paid passenger Abram Pheil, as well as the historical first
commercial pilot Tony Jannus. Since then, the global aviation industry has worked together toward a
unified goal for the past century. Industrial insiders keep the sights ahead with concerted efforts
for a bolder and harmonious world for everyone.
Partnership
66
67
The universe all around us is filled with infinite possibilities. Since its first entry into the aerospace
business 37 years ago, Korean Air has carried out aircraft designing, manufacturing, licensing (production),
performance improvement, restoration, renovation and maintenance operations in preparation for business
of the future. In fact, the company is a supplier of fuselage components to major aircraft manufacturers,
Airbus and Boeing, in addition to being a developer of unmanned aerial vehicles (UAV) and an assembler
of KSLV-I while partnering in satellite development projects and other aerospace businesses.
Development of Space Rocket
68
In the spirit of win-win partnerships with our suppliers, Korean Air is an ardent proponent of the Aviation Industrial Cluster project.
Development of importance of securing and managing a stable supply chain / Growth in demand for fair competition and win-win partnerships
Key Issues on Win-Win Partnerships & Social Contribution
● Supporting suppliers in competency-building programs with education and
technical sharing
● Running Internet Supplier Portal, iSP, as an established channel for communication
with suppliers
● Announcing ‘Aerospace Vision 2020’ that puts forth the size expansion of
its Tech Center for manufacturing aircraft and plans on supporting local small-size
airliners for development of local communities of Busan
● Encouraging and systemizing company-wide social contribution activities with
Korean Air’s designation as a Social Volunteer Certification Center (Nov. 26, 2013)
Korean Air’s Commitment to Supporting Suppliers and Social Contribution
69Per-employee volunteer hours Korean Air’s Major Social Contribution Activities
2.9
2.1
2.8
2011
2012
● Habitat for Humanity
● Small-amount donation campaign
● Pink Ribbon Campaign to fight Breast Cancer
● Mongolia Afforestation Project
● Sponsoring rice
● One Company-One Village sisterhood
● Sky Love Bazaar
● Sponsoring Korean language service at world’s three major museums
● Volunteer medical service by Aviation Medical Center
● Inviting underprivileged children on Jeju Island vacation
● One Company-One Troop sisterhood
2013
Social Contribution Expenses (Unit: KRW)
2011
2012
2013
11,788,030,280
14,841,102,238
10,403,759,751
Meetings with Suppliers
2011 2012 2013
Monthly Monthly Monthly
Major Achievements in Mutual Growth and Social Contribution
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13
As a responsible corporate
citizen, Korean Air promotes
mutual partnerships and
collaborative growth along
with all its stakeholders.
HARMONY FOR EXCELLENCE
KOREAN AIR 2014 SUSTAINABILITY REPORT
Win-Win Partnerships & Korean Air’s Supplier Policy
In a volatile business environment, consistent support and collabora-
tion of excellent suppliers are the prerequisites to sustaining the staying
power of a business. Therefore, Korean Air applies its utmost to identify
competent suppliers and foster them in long-term partnerships through
diverse mutual growth programs enabling both sides to generate profits
and evolve from these relationships.
Selection and Management of Business Partners
In principle, Korean Air selects suppliers from competitive bidding, giv-
ing advantages to those who can afford long-term partnerships based
on its total cost of ownership (TCO) methodology. We sift through the
candidates with a comprehensive review of the applicants’ ethics poli-
cies, financial conditions, HRM programs, safety & health policies, compli-
ance with human rights and labor laws as well as certification-holdings
to finalize business partners. Once selected, suppliers become subject to
evaluation for further improvements to foster partnerships.
Systematic Management
Diverse Support Programs
Effective Communication
Establish a win-win paradigm for mutual growth with SMEsPromote ethical purchasing and fair trade culture
● Win-Win Partnership Council (2011-present)● Operating a portal (ISP) for business partners● Regular meetings/seminars and satisfaction
surveys
● Selection of Business Partners
- Reflecting CSR practices of suppliers in selection process
according to Korean Air’s procurement guidelines
● Fostering Competent Suppliers
- Evaluation system, satisfaction surveys
● Cash payment in full● Raw material expenses-linked pricing system ● Sale & leaseback of expensive equipment● Profit-sharing● Technical support, technical training
Effective Communication
Systematic Management
Diverse Support Programs
Supplier Evaluation Process
Evaluation categories
Evaluation indicators
Selection of suppliers to be
evaluated
Selection of evaluators
Qualitative evaluation
Quantitative evaluation
Analysis of the evaluation
results
Follow-up process
Master data Select suppliers to be evaluated Create evaluation scores REPORTING
70PROGRESS
CONTEXT
71
Communication with Suppliers
Korean Air always strategizes a way to address the pending issues and griev-
ances of suppliers. Its Internet Supplier Portal (iSP) is an established commu-
nication channel for its business partners regarding inquiries and suggestions
as well as real-time tracking of order-placement, shipment and payment.
Additionally, we have in place a technical support system for suppliers, facilitating
timely production of a higher quality of products at the most competitive cost.
Other programs for mutual growth with our suppliers include partnership
agreement signing ceremony and council, supplier support policies and sat-
isfaction surveys. All these programs are instrumental interactive communi-
cation programs as part of our endeavors towards co-prosperity with our
suppliers through ceaseless improvement.
Major Win-Win Partnership Programs and Performance
As of 2013, the number of Korean Air’s suppliers count 640. In adoption of the
Fair Trade Agreement as recommended by the Korea’s Fair Trade Commission
(FTC) in 2013, the company signed agreements with its aircraft manufactur-
ing suppliers on fair transaction and mutual growth. Additionally, Korean Air
is adopting the four guidelines as recommended by the FTC, including the
guidelines for signing agreement between large corporations and SMEs on
win-win partnerships, and running a report center for unsound transactions.
In the future, Korean Air will continue developing more mutual-growth pro-
grams in order to establish a mutually beneficial business paradigm for both
large corporations and SMEs.
Tripling the Suppliers’ Sales through Intensive SME Support Programs
Recent findings showed that the accumulated sales of Korean Air’s tall
processing suppliers tripled over three years from KRW 13.5 billion in
2009 to KRW 53.0 billion to 2012. This can be accredited to Korean
Air’s commitment to supporting its SME partners’ competency-building
through programs such as technical support, facility and equipment
lease, and quick bill settlement. In fact, Korean Air holds monthly meet-
ings with the on-site foremen of suppliers to listen to their voices. In
2013, the company improved the payment conditions to settling pur-
chase bills in cash within 10 days of issuance. The previous conditions
had allowed a 60-day grace period. Korean Air also leased the process
and facilities required for receiving orders from major companies, like
Boeing and Airbus.
Aviation Industrial Cluster
At the moment, Korean Air is expanding its Tech Center in Busan-
home to Korea’s aircraft assembly lines. The company is also an
ardent proponent to the Busan Municipal Government’s project to
create a collaborative complex within the Aviation Industrial Cluster.
Adding to its existing 710,000-square-meter MRO tech center, the
company is setting up a new 230,000-square-meter center that will
accommodate assembly lines for aircraft, composite materials plant,
avionics maintenance, repair and overhaul (MRO) center and inter-
national joint development center for civil aircrafts as well as an
automated logistics center. Approximately 50 companies, including
the venture service center, Aerospace Service Center, composite
material manufacturers, aircraft component & maintenance plants,
high-precision machinery processing plants, and component sur-
face processing plants will establish shop within the neighborhood.
Korean Air offers these suppliers with exclusive order placements,
technical and financial aids to help them grow into leading global
partners to the aviation industry.
2014 SUSTAINABILITY REPORT HARMONY FOR EXCELLENCE
“ As the nation’s leading premium air carrier, Korean
Air is highly expected to mobilize all its available
resources to provide a higher quality of service and
its suppliers are also expected to follow in suit. In the
same context, all Korean Air employees are required
to maintain a service mindset to meet customer needs
for a greater standard on safety and convenience.
In this regard, I believe the company can see an
appreciation in corporate value based on enhanced
trust and will be able to achieve sustainable growth
once being able to draw a clear line among roles and
responsibilities between its own and its suppliers’
employees under the shared goal of trust-building
and top-quality customer service.”
Kim Young-ho Management Director at Korea Airport Service (KAS)
Stakeholder Interview
72
Major Win-Win Partnership Programs
● Cash payment of purchase bills: contributing to suppliers’ liquidity through
payment in full cash
● Raw material expense-linked pricing policy: pegging the volatile commodity
prices and foreign exchange rates to suppliers’ prices
● Sale & leaseback of expensive equipment: purchasing and leasing back
expensive equipment to suppliers
● Profit-sharing: joint technology R&D and sharing profits with suppliers
● Quality symposiums: hosting joint symposiums with Boeing aircraft manu-
facturer
Supporting Suppliers
● Education & training for suppliers’ employees: job training in support of
suppliers’ quality control competencies and technical competencies
● Technical support to suppliers: supporting suppliers in timely production
and quality control
● Technician support to suppliers: dispatching skilled technicians to suppliers
and supporting round-the-clock monitoring
● Privileged long-term contracting with excellent partners: supporting them
for sustainable growth through long-term contracts or continued extension
of contracts
SUSTAINING EXCELLENCEHARMONY FOR EXCELLENCE
KOREAN AIR
Korean Air’s Mutual Growth Strategies
Joint technology R&D and
profit-sharing
Educational support & HRD
Active communication
Mutual cooperation with suppliers
NEXT STEP
Social Contribution Activities at Korean Air
Departing from the old-fashioned monetary support or occasional volunteer
services of employees, corporate social responsibilities have evolved into
more comprehensive, creating shared value (CSV) activities benefitting both
the company and all its stakeholders by proactively addressing social issues.
Against this backdrop, Korean Air has consistently developed and participated
in diverse social contribution activities maximizing the shared value, thereby
helping reinforce its future growth potential and promote social values at the
same time.
73
2014 SUSTAINABILITY REPORT HARMONY FOR EXCELLENCE
Korean Air’s Social Contribution Philosophy
Remaining vigilant to various social issues, Korean Air actively gets involved in a
number of social service programs and encourages the partaking of its employ-
ees and customers. Social Service Office Steering Committee systematically
supports employees’ volunteer activities. At the moment, there are 23 volunteer
corps, where approximately 4,000 of our employees are active members. Since
2003, each of our employees have donated a small fraction of their monthly pay
to a communal fund, where the company makes donations in matching grant.
Total funding amounted to KRW 1.7 billion as of the end of 2013.
Giving back to
society, Korean Air
is creating
shared value.
Education● Inha Academic Institute: Inha
University, Inha Technical College, Inha
Middle & High Schools attached to
Inha University’s College of Education
● Jeongseok Academic Institute: Korea
Aerospace University, Jeongseok
Aviation Technical High School,
Jeongseok University
● Global industrial-academic cooperation
Sports Sponsorships● Sponsorship of international sporting events
● Sponsorship of sports players (Excellence
Program)
● Korean Air Table Tennis Team
● Korean Air Jumbos Pro Volleyball Team
● Korea’s first Men’s Speed Skating Team
Green Management● Korean Air Green Ecological Zone at Kubuqi
Desert, China
● Korean Air Forest in Baganuur, Mongolia
● Participation in ‘eco-city’ development
project in Songdo New Town
● Distribution of saplings on Tree-Planting Day
Cultural Sponsorhips● Sponsoring Korean language service
at world’s three major museums
● Korean On-Air program
● Flying Art Ambassador
● Korean traditional dishes in catering
service
Sharing Management
Volunteering
● Small donation campaign
● Sky Love Bazaar
● Habitat for Humanity
● Pink Ribbon Campaign to
fight breast cancer
● One Company-One
Village sisterhood
● Rice donation
● In-house volunteer corps
Disaster Relief
● Transporting disaster
relief items
● Disaster relief activities
PROGRESSCONTEXT
74
SUSTAINING EXCELLENCE KOREAN AIR
Investing in the Next Generation
Korean Air invites children to directly take in on-site business operations and
provides English classes to the students of Yongyoo Elementary School in
Incheon. In addition to its donations to various education programs, the com-
pany operates special programs for juveniles. On the global front, we made a
commitment worth USD 200,000 to UNOSDP YLC program helping youth in
underdeveloped countries. We also donated libraries and computer labs to un-
derprivileged communities in China and Mongolia.
Protecting the Environment
Our signature environmental protection campaigns, such as the Afforestation
Projects in Baganuur of Mongolia and Kubuqi of China are only the tip of the
iceberg when it comes to Korean Air’s active engagement in the environmental
clean-up of an expanding Incheon and attracting tourism of Jeju’s popular Nog-
gome Oreum (hill). Additionally, we distributed gardening kits to customers on
Arbor Day and mounted on a campaign to raise public awareness of protecting
the environment.
HARMONY FOR EXCELLENCE
2013 Major Social Contribution Activities
Fertilizing Cultural Activities
Korean Air sponsors a number of cultural, artistic and sports activities in Korea
ranging from the company holding New Year’s music concerts every year, female
ex-flight attendants’ club KASA CHORUS giving special concerts on Disabil-
ity Day, the company sponsoring the Heojun Cultural Festival, and the holding
of a number of cultural exhibitions and performances for the culturally under-
privileged. In 2013, the company-selected rhythmic gymnast, Son Yeon-jae, and
sculptor and installation artist, Suh Do-ho, were selected as beneficiaries of the
year for its sports and cultural sponsorship program, Excellent Program.
Sharing with the Underprivileged
All Korean Air employees chip in to the Small Donation Campaign to raise funds
for supporting the underprivileged. And the 23 in-house volunteer corps,
including Gonihoe and Seungwoohoe, volunteered hours to help those in need.
In 2013, we donated KRW 3.0 billion to the Community Chest of Korea and
helped the underprivileged at social charities while also participating in the
Habitat for Humanity.
75
2014 SUSTAINABILITY REPORT HARMONY FOR EXCELLENCE
Person-year Annually
4,12923groups
2014 Plans for Social Contribution Activities
Volunteer Activities Certification
● Korean Air was designated as the certification authority of social service,
motivating more active participation and enabling systematic manage-
ment of volunteer activities
Enhanced Promotion and Communication on Volunteering
● Enhancing public promotion and communication by promoting Volunteer
Corps CIs and publishing webzines
Social Contribution Events Celebrating 45th Anniversary
● Holding various special events, including special bazaars, inviting youth
to the company and special trips to Jeju
● Hosting company-wide campaigns and global volunteer activities in link
with the 2014 Harmony Campaign
Encouraging Diversified Company-wide Volunteer Activities
● Developing diverse places and programs for volunteer activities
● Partnering with NGOs for more systematic and long-term approach to
volunteer activities
“ Amid the global aviation market’s rapidly changing,
the aviation industry is sustaining growth. As the
nation’s leading air carrier, Korean Air is responsive
to various economic and environmental issues and
has to be able to anticipate and address business
issues with creative corporate culture and responsible
decision-making to prepare for its future challenges.
At the same time, its domestic leading position as an
air carrier calls for its taking initiative in meeting to
the pending technological issues, such as aviation bio
fuel and aviation safety operational technology that
its domestic rivals have yet to effectively prepare for.
In the meantime, the company is required to fulfill its
corporate, social responsibilities as a leading global
airliner.”
Park Jin-suh Researcher at the Aviation Policy & Technology Research Division, Korea Transport Institute
Stakeholder Interview
Employees’ Volunteer Participation
NEXT STEP
76 APPENDIX 77 UN Global Compact
78 Awards and Associations
79 GRI Index
85 Third Party Assurance Statement
2014 SUSTAINABILITY REPORT
77
UN GLOBAL COMPACT
The UN Global Compact is a strategic policy initiative for businesses
that are committed to aligning their operations and strategies through
ten principles related to the areas of human rights, labor, environment,
and anti-corruption. Korean Air joined the UN Global Compact in July
2007, believing that the core values of the Compact are in line with the
Company’s commitment to business ethics, transparent management
and corporate social responsibility. Korean Air will continue to embrace
and support the ten universally accepted principles of the UN Global
Compact as listed below.
PRINCIPLES
HUMAN RIGHTS
Principle 1. We support and respect the protection of internationally proclaimed human rights.
Principle 2. We make sure that we are not complicit in human rights abuse.
LABOR
Principle 3. We uphold the freedom of association and the effective recognition of the right to collective bargaining.
Principle 4. We uphold the elimination of all forms of forced and compulsory labor.
Principle 5. We uphold the effective abolition of child labor.
Principle 6. We uphold the elimination of discrimination in respect of employment and occupation.
ENVIRONMENT
Principle 7. We support a precautionary approach to environmental challenges.
Principle 8. We undertake initiatives to promote greater environmental responsibility.
Principle 9. We encourage the development and diffusion of environmentally friendly technologies.
ANTI-CORRUPTION
Principle 10. We work against corruption in all its forms, including extortion and bribery.
Compliance with the UN Global Compact at Korean Air
UN Global Compact
Principles KAL Activities Reported Page
Area
● Compliance with the UN Global Compact ten
principles and International Labor Organization
Conventions
● Training on business ethics and sexual harassment
prevention
● Upholding the freedom of association and
collective bargaining rights
● No forced labor or child labor under stipulations as
provided in the Korean Labor Standards Act and
the ILO Conventions. No case of such violations.
● Increasing female and disability employment
● Hiring international talent without discrimination
based on nationality, culture, or religion
● Strict compliance with GHG emissions regulations
at all our business premises
● Company-wide ISO 14001 certification
● GHG Inventory System & GHG emissions
reduction initiatives
● Adopting cutting-edge, eco-friendly aircrafts and
engines with higher fuel efficiency and less noise
emissions
● Proclamation of the Ethics Charter and compliance
with the ten principles of the UN Global Compact
● Anti-corruption education
● Whistleblowing program
● Fair trade voluntary compliance program
● Implementing compliance support programs
1. We support and respect the protection of
internationally proclaimed human rights.
2. We make sure that we are not complicit in
human rights abuse.
3. We uphold the freedom of association
and the effective recognition of the right to
collective bargaining.
4. 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 respect of employment and occupation.
7. We support a precautionary approach to
environmental challenges.
8. We undertake initiatives to promote greater
environmental responsibility.
9. We encourage the development and
diffusion of environmentally friendly
technologies.
10. We work against corruption in all its forms,
including extortion and bribery.
Human
Rights
Labor
Environ-
ment
Anti-
Corrup-
tion
3, 14~15, 34
34, 40~50
52~64
3, 14~15
APPENDIX
78
SUSTAINING EXCELLENCE KOREAN AIR
Associations and Memberships
AssociationCategory
International Air Transport Association (IATA), Association
of Asia Pacific Airlines (AAPA), SkyTeam, Korea Civil Aviation
Development Association, 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
Korea Business Council for Sustainable Development,
Business Institute for Sustainable Development of Korea
Chamber of Commerce and Industry (KCCI), The Federation
for Korean Industries, Korea Economic Research Institute,
Korea Employers Federation, Korea Chamber of Commerce
and Industry, The Federation of Economic Organizations,
Korea-Japan Economic Association, Korea Listed Companies
Association, Korea Exchange, Korea Customs Logistics
Association, International Management Institute, Korea
International Trade Association, Korea-U.S. Economic Council
Green Company, Business Council for Green Growth, Gangseo
Business Group for Environmental Practices, Voluntary
Agreement of the Aviation Industry on GHG Reductions
Nanum Korea, Korean Council on the Protection of Personal
Information, Korea Forum for Progress, Asia Society Korea
Center, Korea-Mongolia Forum, Visit USA Committee Korea,
Seoul International Forum, Korean Business Council for
the Arts, Korea Management Association, Takamadonomiya
Memorial Foundation, Korea Support Committee for the
International Vaccine Institute
Aviation
Economy
Environment
Society
Awards and Associations
2013 Awards
AwardsCategory Organizations Dates
Jan. 9, 2013
Jan. 15, 2013
Jan. 17, 2013
Jan. 23, 2013
Jan. 24, 2013
Feb. 26, 2013
Mar. 5, 2013
Mar. 12, 2013
Mar. 28, 2013
Apr. 3, 2013
Apr. 5, 2013
May 14, 2013
Jun. 27, 2013
Jun. 27, 2013
Sep. 30, 2013
Dec. 22, 2013
Dec. 30, 2013
Jan. 17, 2013
Jan. 23, 2013
Mar. 19, 2013
Apr. 18, 2013
Jun. 11, 2013
Oct. 16, 2013
Nov. 22, 2013
World’s Best Business Class Airliner
Asia’s Best Airliner
2013 The Most Trusted Brand Chosen by Consumers
2013 Best Brand Chosen by Consumers
Best Airliner
2013 Asia-Pacific Airline Retail Awards Best Airline for
Inflight Retail
2013 Korea Brand Power Index (K-BPI)
2013 Korea Brand Star
Internet, billboard and newspaper categories at the 21st
Consumers’ Choice of Ad Awards
2013 National Brand Awards
Billboard Advertising of the Year at the 20th Ad of the
Year Awards
Best online service provider at the 2013 DFNI Asia/Pacific
Awards
Ranked 1st of the air passenger transport service at the
Global Customer Satisfaction Index (GCSI)
Ranked 1st among domestic airliners at the Korean Stand-
ards’ Service Quality Index (KS-SQI)
Ranked 1st in the Korea Customer Satisfaction Index (KCSI)
Top 3 international airlines in China at the 2013 Beautiful
China Xinhuanet Travel Awards
Best Airline in Asia, Best A380 Layout
Best Airliner in the area of social contribution at the 2012
Beijing Evening News Travel Trends Awards
2012 Social Contribution Project Award
Best HRD Award
Pathfinder Supplier of the Year 2012
Seven-Star Airline for Safety and Product
Ranked 1st in the airlines category of the 2013 Korean
Sustainability Index (KSI)
Sustainable Product Liability Index
Economy
Society
Environ-ment
Oriental Morning Post
Voyage
Digital Chosun Daily
Forbes Korea
Travel & Leisure
Airline Retail Conference
Korea Management Association Consulting
Brand Stock
Korea Advertisers Association
JoongAng Daily, National Brand Awards
Nomination Committee
Korea Advertising Society
Duty Free News International
Japan Management Association Consulting
Korean Standards Association
Korea Management Association Consulting
XINHUANET
Premier Traveler
Beijing Evening News
The 3rd China Charity Festival
Korea HRD Industry Association
The Boeing company
Airlineratings.com
Korean Standards Association
Journalists Association of Korea
79
2014 SUSTAINABILITY REPORT APPENDIXGRI Index
Pages Third party assurance
2-3
16-17
4-7
4-7
4-7
8-9
12-13
8-9
4-7
34-36
39
20-21
About this report
16-17
77
78
About this report
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
80
SUSTAINING EXCELLENCE
DescriptionsIndicators Pages Third party assurance
A. Process for defining report content and Aspect Boundaries
B. Explanation on how organization has implemented Reporting Principles for Defining Report Content
List of all material Aspects identified in process for defining report content
For each material Aspect, Aspect Boundary within organization are as follows: - Clarification of relevancy of Aspect material within organization
- If Aspect is not material for all entities within the organization (as described in G4-17), select one of following two approaches and report either:
a. List of entities or groups of entities included in G4-17 for which Aspect is not material
b. List of entities or groups of entities included in G-4-17 for which Aspects are material
- Any specific limitation regarding Aspect Boundary within organization
For each material Aspect, Aspect Boundary outside the organization is as follows:
- Clarification of relevancy of Aspect material outside of organization
- If Aspect is material outside of organization, identify entities, groups of entities or elements for which Aspect is material and
describe geographical location where Aspect is material for entities identified
- Any specific limitation regarding Aspect Boundary outside organization
Effect of any reiteration of information provided in previous reports and reasons for such reiteration
Significant changes from previous reporting periods in Scope and Aspect Boundaries
List of stakeholder groups engaged by organization
Basis for identification and selection of stakeholders with whom to engage
Organization’s approach to stakeholder engagement, including frequency of engagement by type and by stakeholder group
Key topics and concerns that have been raised through stakeholder engagement and organization’s response, including its reporting.
Report stakeholder groups raising each key topic and concern.
Reporting period (such as fiscal or calendar year) for information provided
Date of most recent previous report (if any)
Reporting cycle (such as annual, biennial)
Provide contact point for questions regarding report or its contents
A. ‘in accordance’ option chosen by organization B. Report GRI Content Index for chosen option
C. Report reference to External Assurance Report if report has been externally assured. GRI recommends use of external assurance, but it is not required
to be ‘in accordance’ with Guidelines.
A. Organization’s policy and current practice with regard to seeking external assurance for report
B. If not included in assurance report accompanying sustainability report, report scope and basis of any external assurance provided.
C. Relationship between organization and assurance providers
D. Clarification of involvement of highest governance body or senior executives in seeking assurance for organization’s sustainability report.
G4-18
G4-19
G4-20
G4-21
G4-22
G4-23
G4-24
G4-25
G4-26
G4-27
G4-28
G4-29
G4-30
G4-31
G4-32
G4-33
Identified Material Aspects and Boundaries
Stakeholder Engagement
Report Profile
18-19
GRI Index
GRI Index
GRI Index
Not applicable
About this report
21
18
18
19
About this report
About this report
About this report
About this report
About this report
About this report,
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
KOREAN AIR
81
Indicators Pages Third party assurance
G4-34
G4-35
G4-36
G4-37
G4-38
G4-39
G4-40
G4-41
G4-42
G4-43
G4-44
G4-45
13
13
13
13
12
12
12-13
13
12-13
13
13
16-17
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
Descriptions
APPENDIX2014 SUSTAINABILITY REPORT
82
SUSTAINING EXCELLENCE
DescriptionsIndicators Pages Third party assurance
Highest governance body’s role in reviewing the effectiveness of organization’s risk management processes for economic, environmental and social topics
Frequency of highest governance body’s review of economic, environmental and social impacts, risks, and opportunities
Highest committee or position that formally reviews and approves organization’s sustainability report and ensures that all material Aspects are covered
Process for communicating critical concerns to highest governance body
Nature and total number of critical concerns communicated to highest governance body and mechanism(s) used to address and resolve them
A. Remuneration policies for highest governance body and senior executives for following types of remuneration:
- Fixed pay and variable pay:
a. Performance-based pay b. Equity-based pay
c. Bonuses
d. Deferred or vested shares
- Sing-on bonuses or recruitment incentive payments
- Termination payments - Clawbacks
- Retirement benefits including difference between benefit schemes and contribution rates for highest governance body, senior executives,
and all other employees
B. Clarification of performance criteria in remuneration policy related to highest governance body’s and senior executives’ economic, environmental and social
objectives
Process for determining remuneration; Clarification of remuneration consultants being involved in determining remuneration and their independence of
management; report any other relationships which remuneration consultants have with organization.
Clarification of stakeholders’ views sought and taken into account regarding remuneration, including results of votes on remuneration policies and proposals,
if applicable
Ratio of annual total compensation for organization’s highest-paid individual in each country of significant operations to median annual total compensation for
all employees (excluding the highest-paid individual) in same country
Ratio of percentage increase in annual total compensation for organization’s highest-paid individual in each country of significant operations to median
percentage increase in annual total compensation for all employees (excluding the highest-paid individual) in same country.
Organization’s values, principles, standards and norms of behavior such as codes of conduct and codes of ethics
I Internal and external mechanisms for seeking advice on ethical and lawful behavior, and matters related to organizational integrity, such as helplines or advice lines
I Internal and external mechanisms for reporting concerns about unethical or unlawful behavior, and matters related to organizational integrity, such as
escalation through line management, whistleblowing mechanisms or hotlines.
G4-46
G4-47
G4-48
G4-49
G4-50
G4-51
G4-52
G4-53
G4-54
G4-55
G4-56
G4-57
G4-58
Governance
Ethics and Integrity
16-17
13
13
13
13
13
13
13
13
-
14-15
15
15
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
Undisclosable due to
corporate policy
KOREAN AIR
83
APPENDIX
Material Aspects Pages Third party assurance
Economic
Performance
Market Position
Indirect Economic
Impacts
Energy
Emissions
Products & Services
21
50
-
N/A
36
36
71
26
47
47
47
45, 54
47
48
48
-
45
50
48
48
51-52
54
85-86
85-86
Unsubscribed to a corporate
pension service
Not applicable
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
Not managed currently
Within Outside Economy
Aspects
DMA and IndicatorsBoundary
2014 SUSTAINABILITY REPORT
84
SUSTAINING EXCELLENCE
DMA and IndicatorsMaterial Aspects Boundary Pages Third party assurance
Total number and rates of new employee hires and employee turnover by age group, gender and region
Benefits provided to full-time employees not provided to temporary or part-time employees, by significant locations
of operation
Return to work and retention rates according to maternal or paternal leave
Average hours of training per year per employee by gender and by employee category
Programs for skills management and lifelong learning that support continued employability of employees and assist
them in managing career endings
Percentage of employees receiving regular performance and career development reviews by gender and by employee
category
Percentage of significant product and service categories for which health and safety impacts are assessed for improvement
Total number of incidents of non-compliance with regulations and voluntary codes concerning health and safety
impacts of products and services during their life cycle, by type of outcomes
Type of product and service information required by organization’s procedures for product and service information
and labeling, and percentage of significant product and service categories subject to such information requirements
Total number of incidents of non-compliance with regulations and voluntary codes concerning product and service
information and labeling, by type of outcomes
Results of surveys measuring customer satisfaction
Employment
Training and Education
Customer Health &
Safety
Products & Service
Labeling
●
●
●
●
G4-LA1
G4-LA2
G4-LA3
G4-LA9
G4-LA10
G4-LA11
G4-PR1
G4-PR2
G4-PR3
G4-PR4
G4-PR5
34-35
37-38
39
41
41
40-41
61
-
N/A
N/A
62-63
85-86
85-86
85-86
85-86
85-86
85-86
85-86
85-86
Undisclosable due to
corporate policy
Not applicable
Not applicable
Within Outside 경제Within Outside Society
Labor Practices and Decent Work
Product Responsibility
Aspects
KOREAN AIR
85
2014 SUSTAINABILITY REPORT APPENDIXThird-party Assurance Statement
Introduction
The Korean Standards Association (“KSA”, the assurance provider) was commissioned
by Korean Air to perform a third-party Assurance Engagement of the 2014 Korean Air
Sustainability Report (the “Report”). The KSA presents the following independent opin-
ions based on its assessment of the feasibility of the data contained in this Report. Kore-
an Air has sole responsibility for the contents and performance reviewed in this Report.
Independence
As an independent assurance agency, the KSA does not have any kind of commercial
interest in the businesses of Korean Air other than its responsibility for undertaking
third-party assurance of the Report. We have no other contract with Korean Air that
may undermine our credibility and integrity as an independent assurance agency.
Assurance Standards and Level
This Assurance Engagement follows the AA1000AS (2008) assurance standards to
provide Moderate Level assurance. We have checked the three principles of ‘inclusivity’,
‘materiality’, and ‘responsiveness’ in combination with the information credibility of the
Report. We have also verified whether the content of the Report was created in accord-
ance with the GRI G4 Guidelines and ISO 26000.
Assurance Type and Scope
We have performed a Type 2 Assurance Engagement in accordance with AA1000AS.
This means that we have verified the accuracy and quality of the statements made by
Korean Air and the sustainability performance data included in this Report. This Assur-
ance Engagement covers data from the calendar year 2013. Information from the first
half of 2014 has also been included, depending on the content.
The scope of this Assurance Engagement primarily covers the systems and initiatives
undertaken by Korean Air, including its sustainability management policies, goals, pro-
jects, standards and performance during the reporting period defined in the Report.
While the company’s environmental and social data, as well as its financial data, have
been verified, the scope of the review concerning stakeholder engagement is limited to
the materiality test process.
Assurance Methods
The KSA collected information, data or evidential materials within the specified scope of
assurance, using the following methods:
• Analyses of articles related to Korean Air’s sustainability management published by
domestic media outlets over the last three years
• Analyses of issues reported in the sustainability reports published by domestic and
overseas industry peers
• Visits to Korean Air headquarters/Interviews with employees in charge of sustainabil-
ity management and managers of respective issues
• Verification of the management system and process to improve achievement in sus-
tainability management and to prepare the Report
• Review of consistency between the financial performance data and the company's ‧
audit report/publicly announced data
• Examination of internal documents and other basic materials
Assurance Results and Opinions [At the assurance principle/process perspective]
The KSA has reviewed the draft version of this Report in order to present our opinions
as an assurance provider. Modifications were made to the content of the Report when
deemed necessary. We have not detected any significant errors or inappropriate de-
scriptions in this Report as a result of our Assurance Engagement. As such, we present
our opinion of the 2014 Korean Air Sustainability Report as follows.
Inclusivity
- Has Korean Air engaged its stakeholders in strategically responding to sustainability?
We believe that Korean Air is making an all-out effort to encourage major stakeholders’
participation in promoting sustainability management, and we have assured the pro-
curement and operation of diverse stakeholder communication channels. We are not
aware of any omission of significant stakeholder groups. However, as only a limited ratio
of internal and external stakeholders responded in view of the population groups, our
judgment is apparently based on the collection of a limited number of opinions gathered
from among the stakeholder groups. In the future, therefore, a substantial supplement
will be required to collect opinions from diverse internal and external stakeholders.
Materiality
- Has Korean Air included material information in the Report to help stakeholders make
informed decisions?
We are not aware of any significant omissions or exclusions of data that are material
to stakeholders. We have verified that Korean Air conducted the materiality test with
issues identified in analyses of internal and external environments, and reported ac-
cording to the result. In particular, it is highly evaluated that key issues were derived by
actively reflecting the opinions of the representative stakeholders of important groups
in the materiality test. It is recommended that, in the future, the process by which the
Dear Korean Air Management and Stakeholders
details of the report are defined and determined should be disclosed in greater detail
along with the data concerning the status of responses of the stakeholders.
Responsiveness
- Has Korean Air appropriately responded to stakeholder requirements and interest in
this Report?
We have verified that Korean Air has responded to stakeholders’ needs and interests by
reflecting stakeholders’ opinions in the Report. We are not aware of any evidence that
Korean Air’s response to significant issues of stakeholders has been reported inappro-
priately. It is recommended that, in the future, a management scheme should be further
solidified whereby Plan, Do, Check and Action (PDCA) are steadily performed for all
important issues in conjunction with GRI G4 DMA.
Review of GRI G4 Compliance and Verification by Indicator
We confirm that this Report has been prepared in accordance with the GRI G4 Com-
prehensive Option. Based on the data provided by Korean Air, we can also confirm the
validity of the contents related to General Standard Disclosure and Specific Standard
Disclosure indicators.
General Standard Disclosures
G4-1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27,
28, 29, 30, 31, 32, 33, 34, 35, 36, 37, 38, 39, 40, 41, 42, 43, 44, 45, 46, 47, 48, 49, 50, 51,
52, 53, 54, 56, 57, 58
Specific Standard Disclosures
G4-EC1, EC2, EC3, EC5, EC6, EC7, EC8, EN3, EN4, EN5, EN6, EN7, EN15, EN16, EN18,
EN19, EN20, EN21, EN27, EN28, LA1, LA2, LA3, LA9, LA10, LA11, PR1, PR5
Opinions and Recommendations by Sector [On a performance/issue perspective]
We present the following recommendations which are intended to help Korean Air es-
tablish a company-wide sustainability management strategy and respond to continuous
issues of sustainability.
Economic
Korean Air is superior in terms of its continual investments in the creation of customer
value, including the steady introduction of new aircraft, despite its difficult external en-
vironment, including a decrease in sales accompanied by the decrease in the transport
of passengers and cargo volumes as a result of the persisting business depression. In
particular, its strategic approach to gradually increasing the ratio of high-efficiency
equipment while decreasing its low-efficiency equipment seems highly conspicuous. It
is further recommended that Korean Air should pursue solutions while steadily respond-
ing to its still relatively heavy debt ratio.
Environmental
The high price of oil and climate change are critical environmental issues, which act as
significant risks to businesses. Korean Air has promoted a policy for maintaining its fuel
control scheme and reducing greenhouse gas emissions based on its internal environ-
mental management system. Its overseas forestation projects, which the company has
steadily implemented along with its schemes for controlling fuel and greenhouse gas,
also seem to be exemplary. However, it is recommended that it should perform a ‘quan-
titative indicator management’ of its environmental management system and ‘QA/QC
programs required for data management’ so as to improve its future efforts concerning
environmental issues.
Social
The company’s project for the development of an airline industry cluster or a complex
for win-win cooperation appears to be a representative model of win-win management
whereby it fosters its suppliers by supporting them with technology and funds for parts
and equipment, as win-win cooperation with suppliers has become increasingly urgent
and important. Further, its active ventures to promote win-win business appear appeal-
ing, including its intensive promotion of outstanding suppliers by operating a portal site
for communication with the suppliers. It is recommended that the company strengthen
or complement the programs now under implementation based on their efficiency by
conducting an objective measurement of their efficiency.
86
SUSTAINING EXCELLENCE
The Korean Standards Association (KSA), established as a special corporation in accordance with the Law for Industrial Standardization in 1962, serves as a knowledge service provider by distrib-uting and disseminating such services as industrial standardization, quality management, sustainability management, KS certification and ISO certification. The KSA is committed to the sustain-able development of Korean society in its roles as ISO 26000 National Secretary, certified GRI training partner, AA1000 assurance provider, KSI(Korea Sustainability Index) operator, UN CDM DOE(development operational entity), and assurance provider of the Korean government’s greenhouse gas energy target management system
12 August 2014
Kim, Moo-HongActing KSA Chairman & CEO
KOREAN AIR
260 Haneul-gil (1370 Gonghang-dong), Gangseo-gu, Seoul 157-172, Korea / Tel +82-2-2656-7114
www.koreanair.com