Securing New Growth Engines Abroad

Back in 2008 when the new CEO Sung Si-chul took office, the corporation suffered from the global financial crisis and the low domestic transportation demand due to the high-speed railway. Under such a circumstance, he put out a slogan of “global management for innovation and challenge,” and developed three action plans for it. Due to his aggressive and well-planned strategies, the corporation has succeeded in getting very tangible fruits. BusinessKorea sat with CEO Sung Si-Chul to hear about the secret of the success. Followings are excerpts from the interview.

It has been more than three years since you took office. Could you briefly tell our readers about your accomplishments and management policy?

After spending almost three decades as a founding member, I became the first CEO of the Korea Airports Corporation to be promoted from within. This was back in 2008, when our business environment was far from favorable, due mainly to the global financial crisis. In addition, the second-phase of the KTX was opened at that time, causing domestic air transportation demand to decline.

To ride out such difficulties, we put out a slogan of “global management for innovation and challenge,” and adopted three action plans – the enhancement of corporate competitiveness through demand creation, the development of advanced aviation safety equipment and the export of equipment for sustainable future growth. We have implemented airport-specific strategies for demand creation, as well as provided airlines with various incentives, assisted low-cost carriers, and increased the number of small-plane flights. As a result, the number of domestic air passengers has increased roughly 27% from 39.98 million to 50.35 million during the three-year period.

Our gross sales have increased from 400.9 billion won to 568.5 billion won during the three years while our net profit broke the 100 billion won mark last year for the first time ever, reaching 119.1 billion. At the same time, we have attained the top grade for three consecutive years at the national assessment of business integrity and customer satisfaction, as well as a government-led business performance evaluation for two years in a row.

What has the KAC done for air route expansion and what are its plans for invigorating regional airports?

At present, we are running 14 airports across the country. We have analyzed air transportation demand, location factors and various other operation conditions and put in place tailored revitalization strategies.

For example, Gimpo International Airport is being nurtured into a world-class business port. A new air route to Beijing was opened last year in this vein in order to connect the capital of Korea, China and Japan. Furthermore, business city hotels, duty-free shops, common user terminal equipment (CUTE) system and free data communication services in and around the airport are meeting the various demands of passengers. Even more timely and differentiated services will follow down the road in order to make it one of the top-tier biz ports of the world.

Gimhae Airport, in the meantime, has been developed into an international airport linking 26 cities in 10 Asian countries by means of short to mid-range flights. Long-range flights to Singapore, India and Europe are currently on the anvil. Jeju Airport is focusing on attracting inbound tourists through the utilization of its sightseeing resources.

Basically, we have a two-track policy for international and domestic airports. For the former, we develop routes that can contribute to the local MICE industry. With regards to the latter, we build inter-regional networks and open up niche markets by providing cost-cutting incentives such as free parking and low-cost carrier backup.

How would you evaluate your current management theme, securing new growth engines abroad? Please detail relevant track records and future plans

During the past 30 years, the corporation has accumulated abundant knowledge and know-how in Korea in regards to airport management. We are now making use of resources for overseas R&D projects, which have begun to yield tangible results these days.

We have developed equipment indispensable for aviation safety, such as an instrument landing system. In addition, systems and other equipment have been exported to airports in 13 countries, including Istanbul International Airport, to fetch 19.5 billion won revenue. Such accomplishments brought us the glorious developer award at the 2010 Frost & Sullivan Asia Pacific Aerospace & Defense Award.

Building on our rich experience in airport operation, we are now engaged in airport construction, management and consulting in various regions. Our first such project was facility improvement back in 2007 at the Tivat International Airport in Montenegro, followed by modernization feasibility studies for Mactan Cebu International Airport and airport management consulting contracts for six Columbian airports. We will continue to form strategic alliances with major players in the industry and foreign airport operators so as to increase our presence in the sector. Our joint project with the Ministry of National Defense to build an international military flight training center overseas is currently in progress.

The efforts for global airport R&D, construction and management mentioned above will be KAC’s new future growth drivers and will account for approximately 30%, or 433 billion won, of our gross sales by 2020. The new growth tool will let us realize our aspiration of joining the ranks of world-class airport enterprises.

What is the corporation doing to better its aviation services and what part is considered a priority?

Our goal is to create higher value by providing top-class services to customers and complying with the most stringent safety standards.

Well aware of the significance of on-site services, all KAC employees are striving to fully reflect customer demands and requests in their service policies by running a comprehensive VOC, or Voice of Customer, system. Our Customer Satisfaction Committee, comprising academics, consultants and top executives, provide counseling and advice for airport service policies, while our partner firms improve on-site service standards at diverse customer contact points by observing their service quality agreements with the corporation. Also in place are regular monitoring sessions and surveys run by external organizations, the results of which are applied to our incentive and penalty schemes.

In result, we have stood out in a variety of management evaluations both home and overseas. For instance, Gimpo International Airport came first in 2011, at the Airports Council International’s service quality assessment, among global airports consisting of 30 or so buildings.

Please give a brief introduction to KAC’s corporate social responsibility activities.

To fulfill its role and responsibility as a sound corporate citizen, KAC employees joined 24 community service groups last year and devoted 27,380 hours in total to social, cultural, environmental and educational welfare services.

More specifically, they have been involved with English camps for marginalized children, housing improvement projects, and volunteer programs, etc. They began to support multicultural families in 2010 and have worked with the Korean National Red Cross and foreign embassies in Seoul to give 533 married immigrant women the opportunity to visit their native countries.

What are your key tasks for the rest of your term?

Our global management policy stated above is not just about launching and proceeding with overseas projects. Rather, it also covers our endeavor to meet global standards in terms of the quality of airport management.

In this vein, for the rest of my term my organization and I will focus on enhancing competitiveness and improving management efficiency. In fact, we have already began facility expansion at Jeju International Airport, domestic terminal remodeling in Gimpo and international flight expansion in Gimhae. These plans go in tandem with our airport-specific growth strategies, e.g., the development of Gimpo into a leading biz port linking Korea with Asian business hubs like China, Japan and Taiwan.

We will continue to listen carefully to our customers during the course so that our airports can be passenger-oriented, equipped with cutting-edge facilities fully utilizing information and biotechnology, and contributing to energy conservation and low-carbon green growth. Such efforts, which will last until the end of this decade, will lay the foundation for KAC to turn itself into a world-class airport operator.