Airlines and Alliances: understanding the mutual benefits - SkyTeam and Korean Air

Transcript

Chen Chuanren:Good afternoon, ladies and gentlemen. My name is Chen Chuan Ren. I'm the regional editor for Air Transport World, part of the Aviation Week network. I hope everyone had a good lunch. Thank you to our sponsors, and those from abroad, welcome to Singapore, my home. I mean, this is not my home, but Singapore. Singapore is my home. And without further ado, I will commence with the panel. You know, the establishment of alliance in the last 20 years has really changed the way how we travel, isn't it? You choose how you fly, which airline you fly, mainly due to the alliance that you're on. For example, for my case, Star Alliance, stuff like that. No one is perfect. But in recent years, it seems that the lines have kind of blurred. Now you're seeing codeshare partnerships and sometimes to a certain extent JVs between airlines from different alliances coming together and working together. And you will see big mainstream carriers owning LCCs, and that's a different story altogether. But to share with us here today some of the experiences, success stories, we have 2 distinguished guests. We have Patrick Roux, CEO of SkyTeam Alliance, and of course, Mr. Kim Tae Joon, SVP – International Affairs Alliances of Korean Air. Welcome to Singapore. Perhaps to set the scene, you know, let's talk about Korean Air's history with SkyTeam. You are the OGs, right? I mean, OGs, for those who are not aware, OG is Gen Z slang.

Tae Joon Kim:Yes.

Chen Chuanren:For originals, the original starters, right? And a bit of your current role and importance to SkyTeam. Who wants to start first? Maybe Mr. Kim.

Tae Joon Kim:Yeah, okay. Korean Air is the founding member of SkyTeam together with Delta, Air France, and Aeromexico in 20— in the year 2000. Since then, we are proactively cooperating with member airlines, helping each other, and Korean Air's role should be providing member airlines with a strong gateway into Asia with the best frequencies and capacities and best connectivities. Currently, merger process with Asiana is going on, so we will finalize it by the end of 2026. After completion of this integration process, we will be able to provide much better, much enhanced frequency, new routes, and better connectivity at Incheon Airport. So this is a good development for Korean Air. Also, the benefit will be shared, equally shared by our member— with our member airlines. So we can contribute much better to SkyTeam and SkyTeam member airlines.

Chen Chuanren:Patrick, I mean, of course, Korean Air has been the We've been with SkyTeam for 25 years. Maybe you can share more about the kind of value for them to stay with you for so long, and how do you think the integration of ASEAN will help SkyTeam?

Patrick Roux:Yeah, as TJ said, Korean Air is a founding member and a pioneer among the 4 pioneers of SkyTeam, and those 4 pioneers had a strong vision at that time was to build, to extend their network, but to extend their market share and their businesses. And not a lot of people are aware, but at that time, antitrust immunity was considered for those 4 members to create a kind of first 4-way JV. It proved to be a little bit complicated, but it was the early age of what we know now as the JVs on certain parts of the world. So Korean Air was really instrumental into this vision. And since then, of course, Korean Air has been very active, a very active member, a supporting member on all projects. We've moved a lot in the recent years to technology. and customer experience to create the most seamless experience for the travelers, and Korean Air is really supporting that. And of course, with the addition of Asiana, for us it's not a new— it will not be a new airline, it will be an addition of capacity, an addition of connection opportunities, new gateways for the alliance. So we are More than ever, very happy to work with Korean Air.

Chen Chuanren:I think for us, it's one of the biggest giants in North Asia right now is, of course, Korean Air and the JV with Delta, another founding member of SkyTeam. Could you tell us, you know, the strength and the kind of power that you can generate from this JV, and what does it mean for both the airline and for the alliance?

Tae Joon Kim:Mr. Kim. Korean Air's joint venture with Delta Air Lines began implementation from May 2018. To tell you the conclusion first, it was very successful and fruitful for Korean Air. It strengthened a lot our competitiveness in the market. This is also same for our member airlines Yeah, let me give you some concrete examples. The success of the Korean Delta joint venture, of course, it may not be the proper success we mentioned in this way in advance, but we hope to develop further this joint venture. The strong point of the Korean Delta joint venture is network and frequencies. Korean Air operates 84 flights, weekly flights, covering 10 US cities. This is already the largest numbers of the cities we serve. And Delta Airlines are currently operating 42 flights a week. Just before joint venture, Delta used to operate just less than 14 flights covering Atlanta and Detroit. But thanks to the synergies, Delta could inaugurate flights to— flight from Minneapolis—

Chen Chuanren:Yeah.

Tae Joon Kim:and recently Salt Lake City. And from next year, Korean Air will add one more flight to Atlanta, and Delta is already operating 2 flights daily from Atlanta. So from May next year, Korean and Delta will operate 4 flights a day.

Patrick Roux:Yeah.

Tae Joon Kim:So in addition to this existing Synergies after implementation of the integration of Asiana. Korean— the current Asiana's operations to US will be added currently to mainland US around 42 flights a week. Then after implementation of integrations from January 2027, integrated Korean Air's operation volume is weekly, weekly around 124, 126 flights a week. This is the strongest frequencies and largest network among Asian carriers. And also, we will optimize the current schedule with Asiana. Then we will be able to provide a much better service and much better connectivity, you know, to our customers. And secondly, I want to mention Incheon Airport. Geographically speaking, Incheon is well located. to cover the whole Asia. Compared with other airports, Incheon Airport is a single airport. For example, some other airports are divided into 2 airports— Haneda and Narita, Beijing and Xiaodu. In this regard, The Incheon Airport's geographical status and their innovative investment and new technologies will contribute a lot to our joint venture. And also, we have a very good mechanism of discussion for better synergies. We discuss any issues And we find the optimal decision. And so thanks to these good synergies, let me give you some example. Compared with 2017, last year's transfer passengers increased by 60%. With the Korean Delta joint venture at Incheon Airport, 1.8 million passengers transport at Incheon Airport. Yeah, so we will try to maximize these synergies after the completion, and also we will make efforts to better serve our member airlines, providing their optimal connectivity at Incheon Airport with the good facilities and good connectivities.

Chen Chuanren:Speaking about Incheon, I want to point the question back to you, Patrick. From an alliance point of view, you know, what kind of facility, what kind of capability is an alliance looking at? when it comes to a hub airport like Incheon? You know, what are some of the pain points that your members have faced, and what kind of things, what are some of the wishlists that Alliance wants to have in mega airport projects like that?

Patrick Roux:Well, to have strong hubs and strong home markets is key in the Alliance, and it's a base of all new discussion of potential new members. In the case of Incheon, it's key. And what Tae Joon just said, that a single airport where capacity will even grow with Asiana, it's a very strong asset. Where usually when we have a home carrier strong in one of the hubs, everything is under the roof of the home carrier. In Korea, it's not the case. So, you're saying that you're going to be It's true in Atlanta. It's true in here. It's true in Shanghai. It's true in Paris, in Amsterdam. And also, the fact to have strong JVs in the network is also a very key asset. And that's— in my previous life, I was in Air France-KLM. I was building JVs. I was running JVs. So I have a lot of expertise there. It's a very powerful tool, but it's bilateral. And when you want to do a multilateral JV, it becomes complicated. And it's where the alliance can play a role. And I always say that we don't want to be the biggest alliance. We want to be the most integrated one, because that's to rely on a number of JVs, a number of equity partnerships, among members, it creates a solid building block to create customer benefits.

Chen Chuanren:You mentioned the most integrated alliance. How do you measure integrated?

Patrick Roux:Well, we measure by the number of JVs, by the number of equity partnerships. Again, it creates some solid base to do more business together. It starts with bilateral discussions, Of course, we don't have a global umbrella or a global ATI, but here again, SkyTeam plays a role in, for instance, building joint corporate contracts where in regions where there's not a strong home carrier, we— and we probably will develop that in Singapore in the coming months. SkyTeam acts as a third party, bundles the offer of all SkyTeam carriers, and so we can be one voice to the market and be stronger. So even beyond the JV border, we can keep this level of integration.

Chen Chuanren:Earlier, TJ mentioned your strong alliance with Delta for the trans-Pacific network. Within Asia-Pacific, you have, of course, partners in East Asia and Southeast Asia. Could you talk about your partnership and the strength of SkyTeam in this part of the world within Asia? You know, how do you plan to, you know, maximise the benefits and the network that you have with your partners in Asia-Pacific?

Tae Joon Kim:I'm sorry, I couldn't correctly understand your questions.

Chen Chuanren:Yeah, so could you talk about your alliances' strength in Asia-Pacific with— within Asia, like, With China Airlines, Vietnam, in Asia-Pacific?

Tae Joon Kim:Yeah, of course, bilaterally we are cooperating with these carriers. 2M from Vietnam and Taipei, and Garuda also. We hope to, we are making efforts to provide best connectivity at Incheon Airport. So no airline can fly all the destinations. Yeah, it is true. So we want to provide to our member airlines the best connectivity to the US, to Europe.

Chen Chuanren:Yeah.

Tae Joon Kim:And also our European members and the US members, we provide, we plan to, we have been providing, and we will be surely able to provide a better connectivity at Incheon Airport. You know, with this, with the integration of Asiana, Korean Air will achieve much stronger, enhanced Enhanced economy of scale, economy of intensity. So this merit, strong point, will be also shared, can be enjoyed by our member airlines.

Chen Chuanren:Patrick, how about your views about your membership in Asia-Pacific? And with that, if I can prod a bit more, of the white markets that hasn't been tapped? You know, you are strong probably in the Northern Hemisphere, but Southern Hemisphere, maybe there's some work to be done. You know, could you add some colour to that?

Patrick Roux:First of all, I would not call it a white spot when we have one-third of our members that are from Asia-Pacific. So it's quite, quite significant. We have 2 in mainland China, China Airlines in Taipei. We have, of course, Korean Air, and we have Garuda and Vietnam Airlines. So it's a lot. Also, I must say, in the rest, thanks to the power of those airlines, but also thanks to the power of the intercontinental airlines of SkyTeam, our presence is very strong everywhere. in Asia-Pacific. And when I was saying that we are, we want to be the, and we are the most integrated alliance, that means that we follow the lead of our key members. So it's what happened, the 2 recent, the most recent new joiners, Virgin Atlantic and SAS, it was a natural consequence of either new JVs or equity partnership integration, and it was a natural step for them to join SkyTeam. So in the region you mentioned, in Southeast Asia, in Southern Pacific, I would say it's the same approach. More and more our members are developing, bilateral partnership with some of the airlines in those regions. At one point, it could become relevant to enter into an alliance discussion. We are close to that, not yet, but again, the primary focus is the strategy of our members, and then as a consequence, we act when needed.

Chen Chuanren:I'm going to spend the next 10 minutes on the future of alliance. You know, how do you think the roles and advantages of major alliances have changed or evolved over the last few years? Who wants to go first?

Patrick Roux:Well, actually, I think COVID was a wake-up call. Because before COVID everyone was saying, yeah, well, with the JVs and equity partnerships, we don't need an alliance. And COVID has shown the power of being part of a family, of exploring unprecedented situations together to find solutions, acceleration. So that has given a new energy to the alliances. And since then, we organize a lot of sharing of best practices for the benefit of all members. An example is on sustainability. We organize— now it's the 4th year of our Aviation Challenge. We used to call it the Sustainability Sustainable Flight Challenge, and it's a friendly competition where all members test new ideas to reduce their carbon footprint, and they share the results, and they adopt, and they implement that. This year, 23 airlines are part of that because we extended to friends and family, as we said, and 80 flights, 8-0, are right now flying to test those solutions.

Chen Chuanren:Anything to add, TJ?

Tae Joon Kim:Yeah, as Patrick mentioned, so we are trying under the leadership of Patrick for SkyTeam members, we are trying to deepen our cooperation, not the volume, just volume, the deeper level of cooperation Is the way we are trying to pursue, you know.

Chen Chuanren:Earlier—

Tae Joon Kim:For example, with his leadership, SkyTeam members were trying to enhance the customer experience with the enhanced IT technologies. So enhancement of the customer experience through IT, that was the very meaningful and appropriate strategies we pursued by now.

Chen Chuanren:Mm-hmm.

Tae Joon Kim:But how are we going to go after, later? So we member airlines will have to seriously study what we need to do, what can be done. In the future, yeah.

Patrick Roux:And on that matter, the customer experience is not necessarily contained in the current SkyTeam scope. More and more, our customers are also connecting on train operators, so it's why we are actively working with train operators all over the world. We start in Europe with Eurostar and Trenitalia, because it's the same customer. That when we take the train or connects or— so here again, we want to provide with this customer with the same seamless technology that the one we apply within SkyTeam. So that's the extension to different operators. Train is one. LCC could be another one.

Chen Chuanren:Yeah, speaking about scope, I was wondering, can major alliances address issues like SAF, supply chain. Does Alliance have the gravitas to, you know, push your message across?

Tae Joon Kim:Sure, sure.

Patrick Roux:We have a lot of discussions with the experts within the member airlines. The problem is not the— the problem is the volume, the quantity. So, but still there are ideas. Also part of the aviation challenge, I mentioned before. Yeah, it's a very important subject for us.

Chen Chuanren:Earlier you mentioned LCCs. You know, what's the significance to SkyTeam members? You know, of course, recently there's news about the investment in WestJet by the Korean Air joint venture. You know, what do you think of the concept of LCCs joining alliance? Tae Joon, you want to start first?

Tae Joon Kim:Yeah, the recent investment in WestJet, that is a kind of our joint effort, strategic joint efforts with Delta and Air France-KLM to enhance our competitiveness, to enhance our network in the white spot area like Canada where we don't have SkyTeam members. So once their safety and their service standard are satisfactory, I don't think we have any limitation, you know, so we can cooperate with any LCCs if necessary.

Chen Chuanren:Patrick, do you agree?

Patrick Roux:Yeah, yeah, it's part of the extension I was mentioning because The customer, when the customer, let's take a KLM customer that is used to fly on KLM and then connecting on WestJet or connecting on IndiGo in India, then for them it's natural extension of their customer experience to have the same seamless tools also when they fly on that. So even if they don't provide the exact same service, as far as seamless experience is concerned, we are considering and contemplating the same. But again, today a lot of SkyTeam members have bilateral partnerships with WestJet, a lot of SkyTeam members have bilateral partnerships with IndiGo, some of them with GOL. We, maybe one day the time will come to discuss about partnership. Not yet.

Chen Chuanren:Okay, we have 4 minutes left. I want to address a couple of questions that appear online. You mentioned IndiGo, Patrick. So the one question is, SkyTeam does not have a partner airline in India. How do you plan to enter the Indian market?

Patrick Roux:That's a little bit the answer, but on top of that, it's also what I mentioned earlier that Also, for instance, Air France-KLM is very strong in India. They have a lot of gateways, more and more. So also we have good connection with Saudi, good connection with local members. So We don't need, even if we don't have an official SkyTeam member in India, the presence of SkyTeam is already quite strong.

Chen Chuanren:One more question is, could you give us an update on SkyTeam lounges? I want to ask that because Korean Air, or one of your executives, I can't remember the name offhand, sorry, but he described lounges as It's the next big thing for passengers to choose which airline, which airlines that you want to go to. So I was wondering, any new updates on SkyTeam lounges around the world?

Patrick Roux:Yeah, a very important one. So first of all, we apply the same policy that what we described earlier. So when we have a home carrier, we, of course, all SkyTeam customers can access the lounge. The home carrier lounge. When we are in— when it's not a home market, then in some countries we develop SkyTeam branded lounges. We have 5 of them today. And the new element that we introduced this year is we gave access to all elite members to domestic lounges. all over the world. So 70, 7-0, new lounges are accessible this year for our members.

Chen Chuanren:TJ, I think Korean Air is investing quite a fair bit on lounges, isn't it?

Tae Joon Kim:Yes, our Incheon Airport Terminal 2 expansion was finished last year, so the current Incheon Terminal 2 will be the terminal for SkyTeams. So the focus was given to best customer experience and operational efficiencies. The airport authorities invested a lot for the expansion, and for Korean Air, we are investing also to make 7 lounges at Incheon Airport Terminal 2 for customers' convenience in the wingtip, 2 relatively small lounges and other main lounges and first-class lounges and Miler lounges. So the new lounges, Korean Air will be one of the top-class lounges in the world. You can expect it. There are good qualities, you know, and these lounges will be naturally lounges of SkyTeam members when they leave, when they leave from Korea, from Incheon, or when they change flight at Incheon Airport.

Chen Chuanren:We are running out of time, but I'm going to ask the panellists here to give us your vision of alliances. You know, what are the future priorities for you? 30 seconds. Could you give us a one or two-liner for the future? Patrick?

Patrick Roux:Well, the ambition is really to develop on seamlessness and integration. So the future is probably to integrate new players. I mentioned train operators, LCCs, could be other players of the industry, to make sure that it's consistent with the customer experience. So whatever the customer experience becomes in the future, our ambition is to be able to provide with products answer to that.

Chen Chuanren:TJ, 30 seconds.

Tae Joon Kim:Korean Air will make its utmost effort to provide the best gateway to our SkyTeam members. And also, as I mentioned previously, we want to deepen the level of the cooperation with IT and with the customer experience.

Chen Chuanren:And with that, I think we have run out of time. Let's give our panelists another round of applause and thank you for your attention. Thank you.

Copyright policy: All transcripts on this site are the copyright of CAPA - Centre for Aviation. Our reproduction policy is as follows: you may quote up to 400 words of any transcript on the condition that you attribute the transcript to CAPA - Centre for Aviation and link to the original video page. All other use is prohibited. While we aim for 100% accuracy in the transcript, there may be some minor transcribing errors.