Chairman Cho Yang-ho of Korean Air.

A model of one of the 100 new passenger jets that Korean Air ordered to let them  to fly short air routes from 2019. The airliner ordered 50 B737 MAX-8s from Boeing and 50 A321 Neo passenger jets from Airbus which will be delivered from 2019.(Photos:Korean Air)

Korean Air Chairman Cho Yang-ho signed MOUs with both of the world’s foremost airplane manufacturers, Boeing and Airbus, during his trip to Paris to watch the 2015 International Air Show held in the French capital.

Korean Air said June 30 it has purchased 100 aircraft, 50 each from both Boeing and Airbus, to replace planes being used for short-haul routes. They will be used to attract more passengers, including Chinese, the biggest group of tourists for Korea, according to the industry. Estimates put the value of the contract at 13 trillion won ($12.2 billion.) “The year 2019 will be our 50th anniversary and we decided to make the biggest investment ever,” Korean Air said in a statement. “We will provide better quality of service by replacing old airplanes with new units.” 

The nation’s leading airline said it bought 50 units of Airbus’ A321 Neo and also 50 units of Boeing’s B737 MAX-8. Korean Air currently flies the Airbus A380 jumbo jet, but it would be the first time it has used the smaller, single-aisle A320. 

The company currently uses the B737s as its primary aircraft for short-haul routes. 

With the new purchase, the Korean Air fleet will increase from 151 aircraft to 251. The company also plans to buy 10 of Boeing’s next-generation B747-8i airliners by 2017. Compared to the B747-400, the B747-8i is expected to help the carrier improve profitability by offering better fuel efficiency and 50 additional passenger seats. The new planes will be replacing aging B737NGs, which will also help cut operating cost by 8 percent. 

Korean Air will pay 100 billion won for each of the 50 A321 Neo planes to Airbus, whose delivery will begin from 2019, the 50th anniversary of the airline and also the same price for the 50 B731/MAX. Both planes have a flight range from 5,634 km to 5,904 km, putting them in the short- to mid-haul range. These planes, using brand new technologies in their engines, can use 20 percent less fuel than existing planes. They will start replacing the B737NG planes totaling around 50 units currently serving the short-haul routes out of total of 124 planes the airline currently operates for its global air routes, showing that the airline is to make a substantial investment to enforce its passenger air fleets.

Korean Air officials said the passenger aircraft that the company is set to import are next-generation passenger airplanes considered to have top safety, comfort and ambience — the most important features that a passenger aircraft should offer to its passengers during flight. Korean Air considered the fact that safety has become the most important feature of an airplane in the airline industry in recent months, when making its decision to buy these types of next-generation aircraft, the officials said.

Officials of Jeju Air, an LCC, said LCCs have trouble buying those super-sized aircraft compared to large airlines, and it seems Korean Air got what they wanted by making a huge deal with the aircraft makers as the economies of scale works every time.

A professor in Seoul said the MERS outbreak and the low-value of the yen made the air carrier business worse, and Korean Air has taken decisive measures to fight off the poor business environment and the competition from LCCs by buffeting its competitive edge with the purchase of the next-generation aircraft. 

LCCs, which first took off in Korea in 2005, have been growing very fast, with the load factor rising from 9.4 percent in the first quarter 2013 to 12.1 percent in the first quarter. This year it’s 13.2 percent, while large airliners’ load factors have been slipping, from 56.5 percent to 53 percent, and to 49.2 percent during the same period. The number of passengers have also been rising slowly. Korean Air’s passenger numbers rose by 8.2 percent in the first quarter this year year-on-year while Asiana Airlines posted a 10.1 percent rise in Q1 year-on-year.