Korean Air stated it "[doesn't] have an official stance" on reports that it has suffered more flight disruptions due to maintenance problems than its peers (Heraldm/AsiaNewsNet, 14-Dec-2010). The carrier, however, noted: "We wouldn’t say this is a systematic problem. We recently recorded an official flight operation rate of 99.92%, which was announced by the government.” It was previously reported that seven Korean Air services were extensively delayed due to maintenance issues between Sep-2010 and 12-Dec-2010. Asiana Airlines had three such occurrences. South Korea's Ministry of Land, Transportation and Maritime Affairs is reportedly considering a stricter inspection involving the entire maintenance system for Korean Air.
Korean Air denies 'systematic problem' with maintenance
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Korean Air's dangerously high debt requires it to shore up confidence. Delta investment would help
Korean Air's strategic positioning is precarious as its main Asia-North America segment faces competition from competitors on both sides of the Pacific. The situation is worsened by financials hammered by the bankruptcy of the Korean Air subsidiary Hanjin Shipping.
Yet even before, Korean Air's debt neared 1,000% and available cash covers only a month of revenues. The market does not have confidence in Korean Air's attempt to fix its liquidity position, and the Cho family that established, and still manages, Korean Air faces sticky scandals. As Korea is in political and business upheaval, chaebol conglomerates are no longer sacred.
Delta Air Lines to the rescue? With strategy and financials battered, Korean Air views Delta's long sought partnership more favourably than it did a few years ago when Korean Air was on a high and seemingly did not need its pushy SkyTeam cousin. Delta may be offering to inject equity into Korean Air, and perhaps will not partner without equity involved.
Delta Air Lines & Korean Air announce joint venture in shadow of China Southern's SkyTeam defection
It is surely no coincidence that Delta Air Lines and Korean Air announce their joint venture a mere two days after their SkyTeam partner China Southern Airlines – the largest in Asia, second largest in SkyTeam and sixth largest in the world – agrees to an investment and broad strategic partnership from Delta's rival, American Airlines, a member of oneworld.
Delta and Korean Air have long flagged their JV and the 29-Mar-2017 announcement is only a Memorandum of Understanding. The JV will have to be strong, with a high level of integration and trust, since it will involve profit sharing and not just revenue sharing.
Yet aside from that Delta and Korean have offered no new details, or even a time frame. Their announcement merely formalises what they have essentially been saying for months.
If it is to be leverage against China Southern-American, it should be noted that the two partnerships will be very different in the medium term and will not create significant competition with each other. The Delta-Korean JV comes with unfortunate timing for Korean Air, which continues to face slackening investor confidence and severe pressure in the Korea-China market.