In the second instalment of our senior executive interview series, Jae Dong Eum, senior vice president and head of the cargo business division at Korean Air, shares insight on how Korean Air Cargo intends to capitalise on shifting demand trends, especially in e-commerce, while navigating potential disruptions in maritime logistics and maintaining a competitive edge through digital innovation and operational efficiency.

How are global economic conditions affecting the air cargo industry, and what implications does this have for Korean Air Cargo?

The second half of 2024 is anticipated to maintain high levels of external volatility, similar to the previous year.

Ongoing conflicts, including the extended Russia-Ukraine war and the intensification of the Israel-Hamas conflict, contribute to global instability, elevating the unpredictability of economic forecasts.

Furthermore, changes in the US’ tariff policy towards China and shifts in EU policy are expected to prolong the existing external instability.

However, there is some cause to be optimistic. An increased likelihood of the US Federal Reserve lowering the benchmark interest rate may stimulate investment and consumer spending, possibly supporting the resurgence of international trade and industrial production. This, in turn, could not only bolster the growth of e-commerce but also raise expectations for an increase in traditional air freight demand.

Additionally, issues such as navigational constraints in the Red Sea region due to conflict, alongside container scarcity and port congestion, are expected to increase maritime freight rates, potentially leading to a shift of more volumes to air transportation.

Given the substantial market uncertainty, Korean Air Cargo will persistently monitor the market and we will adapt quickly to changes to meet client needs.

In a highly competitive market, what differentiates Korean Air Cargo from other major players in the industry?

Korean Air operates an extensive global network connecting major global cities around the world. This network, integrated with the strategic geographical position of Incheon International Airport as a logistics hub, facilitates efficient cargo transportation between Asia-America and Asia-Europe.

For over five decades, Korean Air Cargo has addressed the varied needs of its customers through accumulated expertise in air freight transport and a specialised workforce. We safely and precisely transport a range of cargo including general, pharmaceuticals, semiconductor equipment, hazardous materials, and live animals, ensuring high service quality and reliability.

This confidence in cargo transportation quality serves as the foundation for providing tailored services and optimal air transport solutions, aiming to improve customer satisfaction.

Korean Air’s effective cross-departmental communication, covering areas such as cargo, passenger services, flight operations, and maintenance, allows for swift responses under various conditions. This capacity to make rapid decisions in unexpected situations contributes to Korean Air Cargo’s competitive advantage in the international market.

What major trends do you foresee impacting the air cargo industry in the next five to 10 years?

The growth of cross-border e-commerce, triggered by the pandemic, continues to drive increased air cargo demand. This trend is anticipated to persist, but the resurgence of belly space on China-US passenger flights and the growing market dominance of major e-commerce shippers puts pressure on reducing air freight costs.

The air cargo industry is currently emphasising the digitalisation and automation of logistics. Airlines are enhancing customer service and operational efficiency through investments in technologies such as IoT and AI.

Korean Air is dedicating resources and time towards developing an advanced smart terminal, in collaboration with airport authorities, government, and partners, and is focusing on improving work efficiency and customer convenience by extending direct customer interactions via APIs.

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How is Korean Air Cargo leveraging advancements in digitalisation to optimise operations and drive efficiency?

Korean Air Cargo continuously pursues operational efficiency enhancements and customer satisfaction in the dynamic digital era. We monitor industry technological advancements and integrate them to deliver services aligned with customer requirements.

Through direct system integration, airline and customer data is exchanged in real-time, enabling efficient and effective schedule checks and freight rate verification. We currently offer services via direct links with multiple global forwarders and intends to further expand direct system integration.

Additionally, Korean Air Cargo supports the adoption of IATA’s ‘One Record’ initiative and we are actively preparing for its implementation, and participating in One Record Pilot tests.

Korean Air Cargo mandated e-AWB usage for outbound general cargo departing from Korea from March 2024, initiating efforts toward paperless management and ESG compliance. We aim to expand e-AWB adoption to international cargo gradually.

What are the main goals of Korean Air Cargo for the remainder of 2024?

Korean Air maintains a steady provision of both cargo and passenger flights globally, ensuring consistent service quality.

Throughout the winter period, we will sustain our network and supply, with additional allocations to match market demand for the year-end peak season.

Through ongoing customer-focused management, Korean Air aims to continue delivering superior quality cargo and passenger services distinct from our competitors.

What are the key areas of investment for Korean Air Cargo over the next few years?

Korean Air Cargo is renovating its Incheon and New York cargo terminals to improve terminal work environments and increase operational efficiency. The renovations aim to ensure employee’s safety and boost on-site efficiency. The adoption of advanced technology and equipment is expected to enhance service quality.

We are also implementing smart terminal projects to increase workflow speed and enable efficient staff reallocation through automation, anticipated to improve overall productivity.

With a global surge in e-commerce over recent years, how has Korean Air Cargo adapted its operations to meet the increased demand for fast and reliable shipping?

The growing influence of shippers in the logistics supply chain necessitates prompt and accurate needs assessment due to the increasing importance of logistics and more complex requirements.

E-commerce shippers seek rapid transit and quick delivery, expecting high transport service levels. Fulfilling 100% of e-commerce’s voluminous demands is challenging.

Korean Air launched a Shipper Sales Team last year to frequently capture and respond to customer needs, allowing for a competitive advantage in product and service offerings. This ongoing strategy has resulted in high customer satisfaction with our services.

How are customer expectations changing, and what steps is Korean Air Cargo taking to meet and exceed these expectations?

During the pandemic, supply chain instability affected the operations of forwarders and shippers. Customers have expressed a preference for reliable and precise service, sometimes at a higher cost. In response, Korean Air Cargo has emphasised maintaining consistent flight schedules and punctuality.

In the event of unforeseen circumstances, we will quickly share information with customers to work together towards a solution. This customer-centered service approach is also the reason why Korean Air Cargo was able to achieve superior performance compared to our competitors during the pandemic period.

Korean Air Cargo has developed specialised transportation solutions, particularly for items such as pharmaceuticals, heavyweight/oversized cargo, live animals, and semiconductor equipment, aligning with the logistical needs of our customers.

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Can you discuss Korean Air Cargo’s efforts towards sustainability and how you are addressing environmental concerns within the industry?

In alignment with industry-wide climate change mitigation goals, Korean Air initiated a customer participation-based sustainable aviation fuel (SAF) programme in September 2023. This initiative is notable due to the limited number of similar programmes within the Asian aviation sector, which has led to participation inquiries from global forwarders.

Korean Air aims to maintain its involvement in industry efforts to address climate change, working with various stakeholders.

Korean Air has engaged in efforts to develop a domestic foundation for SAF production and use, through market analysis and R&D.

The airline participates in the government-led ‘Eco-friendly Biofuel Activation Alliance’ to foster the domestic introduction and encouragement of new biofuels, collaborating with various stakeholders on SAF demonstration projects.

Korean Air aims to further collaborate with the government and oil refiners to build a domestic infrastructure for SAF activation.

What are the key regulatory challenges facing the air cargo industry today, and how is Korean Air Cargo navigating these complexities?

Addressing climate change is a worldwide challenge, with nations implementing carbon emission regulations.

Korean Air Cargo is focused on enhancing awareness of the climate crisis and the alternative fuel market, and we plan to continue activities to meet the needs of our customers interested in carbon reduction.

Achieving 2050 net-zero cannot be solely accomplished through airline efforts; it requires support from government actions and the involvement of all stakeholders.

How have recent global supply chain disruptions impacted Korean Air Cargo operations, and what measures are you taking to mitigate these challenges?

The global maritime transport network faces persistent challenges not quickly resolved. Prolonged supply chain disruptions may worsen.

Following the Red Sea incident, maritime freight rates experienced volatility but remain higher than last year.

The decreasing disparity between maritime and air freight costs enhances the competitiveness of air freight.

TI Insight reported a shift in shipper preferences post-incident, with 10% combining maritime and air exports, and 17% switching entirely to air.

Korean Air Cargo is actively monitoring market trends to capture the demand transitioning from maritime to air.

What are Korean Air Cargo’s key strategies for maintaining safety in its operations?

Korean Air Cargo prioritises safety above all. Emphasising ‘back to the basics’ allows for focusing on future challenges by ensuring strong fundamentals.

Safety is paramount in the air cargo industry. We aim to enhance safety management and transportation service quality, striving to offer superior customer service.

Korean Air Cargo is committed to establishing itself as the safest airline globally, driven by customer-centric management.

How did Korean Air manage to navigate the challenges posed by the Covid-19 pandemic?

The pandemic presented unprecedented challenges for the aviation industry. Korean Air Cargo navigated this period effectively, utilising innovative approaches like the operation of cargo-only passenger flights from the onset of Covid-19, leading to notable success.

This was achievable through quick decision-making and efficient collaboration across various departments including cargo, passengers, maintenance, and operations.

The ability to adapt flexibly and maintain unity among employees, even in crisis situations, significantly contributed to Korean Air Cargo’s resilience.

Where do you see the biggest opportunities for growth in the air cargo sector, and how is Korean Air Cargo positioned to capitalise on these opportunities?

The future air freight market focuses on several key areas: the continued growth of e-commerce, recovery of traditional air demand, semiconductor industry reshoring, and adopting a ‘China Plus One’ strategy.

The e-commerce market is expected to grow at a 22% annual rate, with increasing volumes from new Chinese e-commerce platforms. Korean Air Cargo intends to capitalise on e-commerce growth while maintaining traditional air cargo demand.

The semiconductor market should see over 8% annual growth, propelled by advancements in AI and machine learning (ML). We plan to adapt cargo routes based on semiconductor equipment imports and factory relocation timings.

Post-Covid-19, there’s been an accelerated shift of global production from China to other regions like Southeast Asia and Mexico, aiming to diversify production sites and reduce reliance on China.

Korean Air Cargo aims to adjust to this trend by utilising regular flights in such regions.

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