Korean Air - Emergence of a Global Carrier - 1976

KoreanAirLines_schedule_cover_19760401.PNG

First Steps Across the North Pacific

South Korea’s reconstruction after the ravages of World War II and the Korean War took decades, and while there were two launches of an official state airline (KNA in 1947 and the first version of KAL in 1962) the networks they built were fleeting and unprofitable, reaching Japan and Hong Kong only inconsistently until 1965 and 1967. Foreign traffic to Korea in the 1960s was carried primarily by Northwest and Pan Am, Japan Air Lines and Cathay Pacific.

In 1969, the government in Seoul handed the assets of Korean Air to the Hanjin Group. This chaebol was already well-established in ocean shipping and road transportation, owned a company that built hotels, ports, and roads, and owned another company that ran fuel and ground-handling operations at all the country’s airports. Hanjin’s management had big plans for their airline, as well as the talent and funding to execute them.

Hanjin quickly added high-capacity YS-11 turboprops and Boeing 720 four-engine jets to the small Korean Air fleet of Fokker F-27 commuter propliners and DC-9-30 short-range jets. They also grew their route network south to Vietnam and Thailand, and increased links to Japan.

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    Photo by Steve Fitzgerald via Wikimedia Commons, GNU 1.2 license

Photo by Steve Fitzgerald via Wikimedia Commons, GNU 1.2 license

In 1971, KAL added the long-range Boeing 707-320, first in its cargo version (as Korea's manufacturing boom had moved into full gear) and then the passenger version. They started cargo flights to Los Angeles in April 1971, and passenger flights in April 1972, routing via Tokyo and Honolulu. 

The initial service ran twice a week, but demand for both seats and cargo space was so strong that it had gone to daily frequency by the next year. Still the demand could not be met, so Hanjin put in orders for the Queen of the Skies, Boeing's 747, and put them on the Los Angeles run in 1973.

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    Photo by Michael Gilland via Wikimedia Commons, GNU 1.2 license

Photo by Michael Gilland via Wikimedia Commons, GNU 1.2 license

Challenge to Asia's Traditional Hub Network

Those early-build 747s, and the 707-320s and Douglas DC-8-63s in the KAL fleet in the early 1970s were state-of-the-art aircraft for their time, but their range was insufficient for long-range services to Asia. Flights to and from Europe had to go all the way around China and the Soviet Union, so those services usually made two or more stops; somewhere in Southeast Asia and somewhere in the Middle East. Flights to California from the Southern Pacific had to stop at Honolulu for fuel, and across the North Pacific, only Tokyo's location was close enough to allow for nonstops to California. Even then, Northwest and Pan Am needed to use Anchorage, Alaska as a fuel stop on their runs from Chicago and New York City to Tokyo.

Another reason why Tokyo was Northeast Asia's dominant hub was the treaty obligation Japan had not just to the United States, but all the World War II Allies, to allow those countries' airlines to use Japan not just as a stop-over point on their way somewhere else, but also to be able to sell tickets from Japan to "somewhere else". For Korean Air, this meant they could sell not just Seoul-Tokyo, Seoul-Honolulu, and Seoul-Los Angeles, but also Tokyo-Honolulu and Tokyo-Los Angeles: this ensured full flights and steady profits.

The catch to the Tokyo stopover, though, was that flights coming in from one direction had to be balanced by flights going onward in the same direction. This wasn't a problem for Northwest, who could run aircraft in from Seattle, Chicago, California, and Hawaii and then out to a similar number of destinations on the other side of Japan. But it did limit Korean Air, who only had Seoul as a major outbound origin point of Transpacific traffic.

And this was a problem for fast-growing Korean Air, who really wanted to increase frequency to California, and also to open up service to Europe. The only solution was to bypass the Tokyo hub.

Click to expand image.

So for California, in addition to the Seoul-Tokyo-Honolulu-LAX flight, Korean Air added a 747 nonstop Seoul-Honolulu which also continued on to LAX. By April 1976, this allowed KAL to serve Los Angeles with passenger flights 10 times per week.

And for Europe, in March 1975 KAL started a Seoul-Anchorage-Paris passenger run twice per week with 707 equipment. This was the critical move: while Anchorage wasn't itself a passenger traffic source, it was on the North American continent and on the Great Circle Route not just to Los Angeles but even New York City. Also notice on the route map above that KAL was already using Anchorage as an enroute stop for cargo service to California.

International services on Korean Air from Seoul in the April 1976 timetable.

International services on Korean Air from Seoul in the April 1976 timetable.

KoreanAirLines_DC10_1970s.PNG

With the April 1976 timetable, KAL introduced new Douglas DC-10-30 widebody jets for long-range service. And KAL by that point also had on order new variants of the Boeing 747: the ultra-long range 747SP, and the improved 747-200.

These would allow service to New York to begin in March 1979 via Alaska, and at long last, nonstop service from Seoul to Los Angeles in September 1979. Korean Air had the equipment, personnel, and experience to fully-exploit the North Pacific routing and establish a true alternative to the Tokyo hub for North American traffic.

KAL used those DC-10s and 747s to dramatically open new service to the Middle East as well, starting Bangkok-Bahrain flights shortly after this timetable published, and ultimately seven destinations there by the early 1980s, as the Hanjin Group scored airport construction contracts across the region, and needed Korean labor to build them.

KoreanAirLines_schedule_cover_24Feb1981.jpg

Here's how far KAL had reached by early 1981.

By the mid-1990s, Korean Air had also covered the Americas, with passenger flights to 11 destinations in the USA, Canada, and even Brazil!

Underscoring the importance of the North Pacific routing, Korean Air reached an agreement in 2017 with Delta Air Lines (successor to Northwest) to create a joint-venture partnership that will allow Delta to shut down its intra-Asia mini hub at Tokyo.

 

Also see...

Our family-travel airport guide to Seoul-Incheon

What Your Kids Should Eat in Seoul

 

United - acquisition of Pan Am's Pacific Division 1986

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    Composite image;  Pan Am DC-10  by  Aero Icarus  via Flickr, CC 2.0 license, and  United DC-10  by Alain Durand, GNU 1.2 license

Composite image; Pan Am DC-10 by Aero Icarus via Flickr, CC 2.0 license, and United DC-10 by Alain Durand, GNU 1.2 license

A tale of two airlines

By late 1984, it was clear that Pan Am’s strategic blunders were not going to be fixed by a recovering economy: it had paid far too high a price to acquire Miami-based National Airlines for domestic routes that did nothing to feed its New York-JFK hub, and couldn’t even effectively feed its South American services. The airline was saddled with first-generation, fuel-hog jumbo 747s and 747SPs it couldn’t fill except at highly discounted fares, against high fuel prices and interest rates.

Delta, Northwest, and American were now competitors across the Atlantic, and flying from their respective fortress hubs where they could collect and re-route passengers much more effectively than Pan Am could through New York. On its historic Latin American services, Eastern picked up the former Braniff routes when Pan Am could neither pay nor get government approval, and had swiftly integrated them into its massive Miami hub.

On the Pacific side, Northwest had already exceeded Pan Am’s lift into Tokyo; United had been given flights to Tokyo and Hong Kong; and Japan Air Lines, Korean Air, and Singapore Airlines were not only adding capacity to the USA, but doing so with a level of service and seating comfort that Pan Am had not invested in.

Image by  Roger W  via Flickr, CC 2.0 license

Image by Roger W via Flickr, CC 2.0 license

Pan Am was bleeding cash and had sold off its InterContinental Hotels chain and its iconic Manhattan office tower, but its debt obligations were still daunting. And a ground-services strike in early 1985 consumed nearly all the cash Pan Am had on hand. The situation at their New York headquarters was desperate.

Meanwhile, in Chicago, United Airlines’ top management was full of confidence: revenue for the largely-domestic carrier was steadily climbing, as was profitability. They had successfully introduced a fleet of new, fuel-efficient Boeing 767 widebody jets and this was allowing them to phase out old-generation DC-8s and improve their margins at the same time.

Profits from operations meant United had a more-open wallet by lenders, and Chairman Richard Ferris was pulling together a plan to employ that leverage to create a vertically-integrated travel company: using United’s reservations system Apollo, and the Western International Hotel brand they already owned (now called Westin), he acquired more hotels and the Hertz rental car chain – with the goal of owning every step of a traveler’s journey. We would call it a “big data” strategy today – Apollo was one of the biggest computer networks on the planet in the 1980s and had strong penetration in the nation’s travel agencies, and Ferris’ theory was that a one-stop shop would allow United to win a higher percentage of big corporate travel contracts because Apollo could help those companies better track and control their travel expenses.

The corporate name was supposed to be a fusion of "allegiant" and "aegis", and what either of those two concepts had to do with travel no one really understood... 

The corporate name was supposed to be a fusion of "allegiant" and "aegis", and what either of those two concepts had to do with travel no one really understood... 

1983 route map - note the co-promotion of Westin Hotels

Yet United’s management still felt vulnerable: while it was the largest U.S. domestic carrier, it had nearly no high-margin/high-prestige international service, outside of its two Asian routes. The U.S. government had still not approved any of United’s other requests for Pacific and Atlantic routes, and so it found itself feeding its competitors, especially at its San Francisco and Los Angeles hubs.

 

Pan Am's Pacific system in 1982-1984

Pan Am's Pacific system in 1982-1984

Let’s make a deal

So when Ed Acker of Pan Am called Ferris in February 1985, both sides were hungry for a deal. Ferris, in fact, had been proposing an asset purchase for three years. Negotiations went on in secret for a month; neither sides’ creditors or investors were aware until the deal was announced at a joint press conference in April. Wall Street “was taken by surprise” but analysts quickly said both airlines would benefit.

For about $750 million in cash, United would pick up all of Pan Am’s routes to East Asia and the South Pacific, plus 2,700 staff and 18 aircraft (11 Boeing 747SPs, 6 Lockheed L1011-500s, and one McDonnell Douglas DC-10-30 – though United would give Pan Am 5 747-100s). Given that Pan Am was grossing about $770 million and making about $55 million in profit off its Pacific division, it’s clear that United made a very good deal.

Photo by Pedro Aragão via Wikimedia Commons, CC 3.0 license

Photo by Pedro Aragão via Wikimedia Commons, CC 3.0 license

Pan Am bought some time with the asset sale – on the positive side, they started to bring on Airbus A300s for Caribbean and transcontinental flights, and Airbus A310s for lower-traffic European routes, made a more-serious attempt to build domestic connecting traffic into New York JFK, and started a Washington-New York-Boston air shuttle. On the negative side, they were still carrying too much debt, the fleet was still 747-heavy, and competitors were moving much faster to claim market share. Pan Am would end up selling off its crown jewel of flights and landing rights to London’s Heathrow Airport to United in 1990, but still couldn’t cut its way to viability. After the Lockerbie bombing of a Pan Am 747, the airline attempted to form an alliance with Delta Airlines, but that deal unraveled and the carrier shut down entirely in December 1991.

Pan Am's final route map.

Pan Am's final route map.

United’s management was feeling great about the Pacific deal in April 1985 – but they’d left their pilots without a contract for two years. So in May 1985, the pilots and then the flight attendants went on strike for a month, shutting the carrier down nearly completely. United’s agreement to end the strike did not resolve the issues, but rather created a two-tier contract where newly-hired pilots would never see the wages or benefits that older pilots had earned. Instead of easing labor-management relations, the work environment only grew more tense. The pilots’ union considered Ferris an enemy.

Over the next two years, Wall Street would also find complaints with Ferris’ performance, as his vertical-integration strategy failed to deliver superior returns – leading the pilots’ union to ally with investment fund managers and attempt a takeover of the whole company.  Soon, Hertz and the hotels would be sold off, and Ferris would be out of a job. 

 

The new system

The pilots’ strike was a drain on cash and management attention, leading to delays in closing the deal. However, by February 1986 the Pan Am aircraft, gates, staffing, landing rights, and contracts had all been signed over, and after quick application of decals to the fleet, on February 11 United began operation on its new division.

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  Photo by  FotoNoir  via Flickr, CC 2.0 license  

Photo by FotoNoir via Flickr, CC 2.0 license  

Pan Am's former aircraft were given seating updates to match the "Royal Pacific" standard that UA had rolled out when they started Seattle-Tokyo/Hong Kong flights in 1983. (Click for seat maps of the United 747SP - 747-200 - and L1011-500.)

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  Photo by  FotoNoir  via Flickr, CC 2.0 license  

Photo by FotoNoir via Flickr, CC 2.0 license  

United would continue to suffer labor pains and incur debt issues in the 1990s despite continued growth and further asset buys from Pan Am, but for this story, the Pacific Division became a point of pride for the company and marked its ascendance to becoming a true global carrier. Through reorganizations, the crisis after 9/11, and the merger with Continental, these routes only grew in importance to the carrier.

March 2017 routes from United's Hemispheres Magazine

CAAC - Transpacific Inaugural 1981

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  Ilyushin-12 piston-engine airliner. Photo by  Allen Watkin  via Flickr, CC 2.0 license

Ilyushin-12 piston-engine airliner. Photo by Allen Watkin via Flickr, CC 2.0 license

China’s “frenemy” relationship with the Soviet Union in the 1960s-70s had begun with post-WWII ideological alignment and anti-American solidarity, but was increasingly strained by perceptions that Moscow was lining up with old antagonists in Delhi and Hanoi. Lack of access to Western technology and the loss of home-grown engineering talent meant that China was utterly dependent on Soviet-built transportation equipment: the CAAC airline fleet even in the 1970s was still largely made up of smaller piston-engined propeller planes, with a few 1950s-era turboprops and even fewer first-generation Tupolev and Ilyushin jets.

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  Antonov-24 turboprop. Photo by  GothPhil  via Flickr, CC 2.0 license  

Antonov-24 turboprop. Photo by GothPhil via Flickr, CC 2.0 license  

President Nixon’s overtures to the People’s Republic in 1972, plus British and European contacts, gave China’s leaders an opening to change the relationship with Moscow. By the end of that year orders had been placed for 707 long-range jets, and Trident mid-range jets (plus newer long-range Ilyushin-62 jets and Antonov-24 turboprops from Russia). By the mid-1970s, China had the foundations of long-range service in place to Japan, the Mideast, Africa, and Europe, and a reasonably contemporary fleet on its trunk services.

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  Boeing 707. Photo by  wiltshirespotter  via Flickr, CC 2.0 license

Boeing 707. Photo by wiltshirespotter via Flickr, CC 2.0 license

Crossing the Pacific, however, had yet to be accomplished – other Asian economies were starting their remarkable growth period, and the US was increasingly opening its doors for business and migration. Korea, the Philippines, Taiwan, and even Singapore had all started or expanded home-carrier air service to America by the mid-to-late-1970s with brand-new wide-body jets made by Boeing and Douglas. While China and the US were still slowly negotiating transportation agreements, the “Asian Tigers” were quickly passing Beijing by: a loss of “face” to be sure, but practically-speaking, a loss of economic power which China could ill-afford.

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    Photo by  Aero Icarus  via Flickr, CC 2.0 license

Photo by Aero Icarus via Flickr, CC 2.0 license

New management in 1978 at CAAC, the Chinese civil aviation service, finally kicked the bureaucracy into action, getting a treaty with the US finalized, and orders for the newest, long-range Boeing 747SP were in place by the end of the year.

CAAC received its 747s in early 1980 and began nonstops to Paris that spring, followed up with test flights to the US in the fall. Finally, with trained crews in place and support contracts with Pan Am finalized, the first scheduled service from Beijing through Shanghai to San Francisco and New York began on January 7, 1981.

By the time this April 1, 1982 timetable was issued, the service had been extended to Los Angeles, paralleling Pan Am’s route expansion. CAAC would retain this routing for several years, adding an additional weekly frequency to San Francisco but not making major changes until after mid-1985, when the national carrier would be broken up into several regional airlines. CAAC would keep its Beijing hub and most international routes, becoming today’s Air China. The Shanghai division would become today’s China Eastern.

Notice how few flights per week were actually operated in 1982! The Tokyo-Shanghai route was only flown 5 times per week, and there were only 3 nonstops per week on the Tokyo-Beijing route. Paris, London, Bangkok, and Manila were only reached once per week, and there were no flights to Singapore or Australia at this time.

On the domestic-services side, you can see that even on the principal routes CAAC ran very few flights: Beijing-Shanghai was only served 4 times per day; Beijing-Guangzhou not even at 3 times per day, and only 2 daily on the Shanghai-Guangzhou run, with other core routes at well less than daily frequency.

With each regional division controlling its own fleet and choice of routes from 1985 onward, they quickly started competing, building traffic with better service and lower fares, and ordering hundreds of new aircraft.

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  Photo by  Kiefer  via Flickr, CC 2.0 license

Photo by Kiefer via Flickr, CC 2.0 license

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  Photo by  Woodys Aeroimages  via Flickr, CC 2.0 license

Photo by Woodys Aeroimages via Flickr, CC 2.0 license

The Beijing-Shanghai-San Francisco-New York core route was where both carriers’ crews and administrators earned Trans-pacific experience, and even now Air China’s Beijing-SFO/JFK and China Eastern’s Shanghai-SFO/JFK services are treated as flagship routes, with their newest equipment and in-flight services.

Also see:

http://www.nytimes.com/1981/01/08/us/scheduled-air-service-from-china-to-us-resumes.html

and other weninchina resources - - -

Our Transpacific Flying folder on Pinterest

Our Air China folder on Pinterest

Our China Eastern folder on Pinterest

 

Pan Am - 1981 Return to China

Public domain image from Wikimedia Commons, uploaded by the  San Diego Air and Space Museum Archive

Public domain image from Wikimedia Commons, uploaded by the San Diego Air and Space Museum Archive

Pan American World Airways reached China the first time with its “Clipper” flying boats in 1935, and played a key role in organizing domestic air service there in the tenuous pre-war period. But after the 1949 Revolution, American interests were kicked out of the country, and the Communists effectively walled off (pun intended) China from nearly all Western commerce and culture.

President Nixon’s overtures to the People’s Republic in 1972 started tenuous contacts, and in September of that year an order came for ten Boeing 707 jetliners to be operated by CAAC, the national air service. Those aircraft were used on routes to the Mideast, Africa, and Europe, however – it took until 1979 for there to be any agreement on transportation between China and the US, and the first transit was done by cargo ship.

Pan Am had to give up its flights to Taiwan (which was just fine by competitor Northwest Orient), and CAAC had to order, receive, and get trained on new Boeing 747s before service could commence. For CAAC, this started on January 7, 1981, and Pan Am’s service kicked off on January 28.

The first timetable Pan Am put out with the new flights was issued April 26, and is iconic in the #avgeek collecting community. The Great Wall at Badaling had just been restored for tourism, and while it’s clear this photo was taken in fall/winter, what is striking is the utter lack of vegetation – and crowds!

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  Photo by  Aero Icarus  via Flickr, CC 2.0 license

Photo by Aero Icarus via Flickr, CC 2.0 license

Pan Am used the long-range 747SP, which was a customized short-body version of the famous aircraft that could fly the New York-Tokyo leg (or later, Los Angeles-Shanghai) without fuel stops. It was a fuel hog – a big problem when the oil crisis hit - but the best that Boeing could put in the sky with late-1970s technology, and as such it was given the highest prestige. (The standard-size 747-200 would soon offer similar performance with better payload and economics, making accountants and route planners at a number of airlines curse the day their bosses wrote checks to buy the “SP”… and was one of many factors that led to Pan Am’s downfall.)

In the 21st Century, we are used to seeing multiple frequencies per day between American and Chinese business centers, but in 1981 on Pan Am, you had a choice of just four weekly services:

  • A Saturday departure from New York JFK, leaving at 1:15 pm – arriving Tokyo Narita at 3:50 pm on Sunday, then Shanghai Hongqiao at 8:25 pm, and finally Beijing at 11:15 pm.
  • Wednesday and Sunday departures from San Francisco at 2:15 pm, getting into Tokyo at 4:55 on Thursday/Monday, and Beijing at 9:35pm. These two weekly runs did not continue to Shanghai.
  • From September, there was also a Wednesday 1:00 pm departure from Los Angeles, nonstop to Shanghai, arriving Thursday at 6:00 pm, and continuing to Beijing at 9:00 pm.

These scans from the April 26, 1981 schedule show the outbound services available from Beijing and Shanghai:

By no means were these services profitable in the first several years – flights were nowhere near full, as business and immigration connections between the US and China would take time to develop, and both countries were just beginning to come out of economic crises (albeit for different reasons). The 747SP, while paid for, would be an operational money pit for Pan Am well into the 1990s. While Pan Am would eventually get its Pacific services to profitability, their losses on core European services would see the company make another fatal decision when they sold the Pacific division to United Airlines in 1985 for $750 million.

Pan Am’s pioneering work to build relationships in China would ensure United’s success, and today they are the top US carrier across the Pacific, with a strong Star Alliance partner in Air China.

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  Photo by Steve Fitzgerald via Wikimedia Commons, GNU 1.2 license

Photo by Steve Fitzgerald via Wikimedia Commons, GNU 1.2 license