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SUSTAINING EXCELLENCE 2014 Korean Air Sustainability Report

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Page 1: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

SUSTAINING EXCELLENCE2014 Korean Air Sustainability Report

20

14 K

OR

EA

N A

IR S

US

TA

INA

BIL

ITY

RE

PO

RT

Page 2: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 3: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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.

Page 4: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

LETTER FROM THE CEO

KOREAN AIR SUSTAINING EXCELLENCE

02

Page 5: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 6: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 7: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 8: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 9: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 10: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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)

Page 11: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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: %)

Page 12: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

>

Page 13: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 14: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 15: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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.

Page 16: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 17: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 18: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 19: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 20: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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%

Page 21: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 22: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 23: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 24: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 25: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 26: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 27: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 28: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

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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)

Page 30: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 31: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 32: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 33: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 34: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 35: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 36: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 37: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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)

Page 38: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 39: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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.

Page 40: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

- 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.

Page 41: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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, %)

Page 42: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 43: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 44: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 45: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 46: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 47: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 48: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 49: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 50: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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)).

Page 51: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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: %)

Page 52: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 53: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 54: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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*

Page 55: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 56: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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%

Page 57: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 58: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 59: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 60: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

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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

Page 62: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

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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.

Page 64: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

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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)

Page 66: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 67: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

Page 68: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

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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

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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

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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

Page 72: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

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

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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

Page 74: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

“ 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

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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

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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.

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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

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76 APPENDIX 77 UN Global Compact

78 Awards and Associations

79 GRI Index

85 Third Party Assurance Statement

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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

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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

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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

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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

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KOREAN AIR

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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

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Descriptions

APPENDIX2014 SUSTAINABILITY REPORT

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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

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Undisclosable due to

corporate policy

KOREAN AIR

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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

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Unsubscribed to a corporate

pension service

Not applicable

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Not managed currently

Within Outside Economy

Aspects

DMA and IndicatorsBoundary

2014 SUSTAINABILITY REPORT

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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

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Undisclosable due to

corporate policy

Not applicable

Not applicable

Within Outside 경제Within Outside Society

Labor Practices and Decent Work

Product Responsibility

Aspects

KOREAN AIR

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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

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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

Page 89: SUSTAINING EXCELLENCE - Korean Air · SUSTAINING EXCELLENCE KOREAN AIR 04 COMPANY PROFILE Korean Air was founded in 1969 as the nation’s first air-liner. Celebrating its 45th anniversary

260 Haneul-gil (1370 Gonghang-dong), Gangseo-gu, Seoul 157-172, Korea / Tel +82-2-2656-7114

www.koreanair.com