The Korean peninsula is a unique geographical and political stretch of land that hosts one of the world’s most successful economies and one of the most repressive control economies. The airfreight market on the peninsula clearly reflects this duopoly.
The South Korean air freight market is currently experiencing significant transformations driven by major corporate mergers and evolving market dynamics.
Corporate M&A
In December 2024, Korean Air finalised its acquisition of Asiana Airlines, creating one of Asia’s largest airlines. This 1.8 trillion won ($1.3 billion) deal, initiated four years before, overcame various competition concerns and regulatory hurdles. As a result, Korean Air now holds a 63.88% stake in Asiana, which will operate as a subsidiary for up to two years before full integration under the Korean Air brand.
As part of the merger conditions set by the EU’s competition regulator, Asiana’s cargo division was sold to Air Incheon for approximately 470 billion won ($342 million) in August 2024. This acquisition positions Air Incheon as South Korea’s second-largest freight carrier, significantly expanding its fleet and operational capacity.
Market dynamics
The airfreight sector has faced challenges due to declining global freight rates. As of August 2023, rates had decreased for ten consecutive months, with a 41% drop compared to the same month in the previous year. This decline has adversely affected revenues for major carriers; for instance, Korean Air reported a 56% decrease in cargo revenue in the second quarter of 2023.
Despite these challenges, the market was expected to recover, driven by the growth of e-commerce and international trade. Air Incheon’s strategic acquisition and fleet expansion reflect a proactive approach to capitalise on these emerging opportunities.
In summary, while the South Korean air freight market faces short-term challenges due to declining freight rates, strategic mergers and acquisitions are reshaping the industry landscape, positioning key players for future growth.
European relationship deepens
A successful partnership between Korean Air Cargo and Vienna Airport has extended co-operation in cargo handling to support Korean air exports to the EU. The airline has inked a four-year extension of the existing handling contract between the airport and the Korean airline has been signed and will now run until the end of 2028. The partnership with Korean Air Cargo has been in place since the airline’s first flight to Vienna in 2004.
“We are delighted to announce our continued partnership with Vienna Airport. Our co-operation has led to successful business results, and we are confident that this contract extension will lead to further growth and development. We look forward to providing our customers with the best possible transport services and further strengthening Vienna Airport’s position as a major hub for logistics in Eastern Europe,” says Eum Jaedong, executive vice president and head of cargo division at Korean Air Cargo.
Korean Air Cargo is one of the world’s leading cargo airlines and currently connects Vienna Airport with up to ten flights per week to international economic centres. The Korean airline operates a fleet of Boeing 747-400Fs, Boeing 747-8Fs and Boeing 777Fs. For the airline, Vienna Airport is an important gateway for electronic and pharma goods from Asia
North of the border
Airfreight operations in North Korea/Democratic People’s Republic of Korea (DPRK) are strictly limited and highly specialised due to the country’s long-standing political and economic isolation.
The Korean Demilitarized Zone (DMZ) between the two halves of the Korean peninsula roughly follows the 38th parallel north, which is a circle of latitude that is 38 degrees north of the Earth’s equatorial plane. However, the DMZ does not align perfectly with the 38th parallel due to adjustments made during the Korean Armistice Agreement in 1953, which considered battlefield realities at the time.
The DPRK’s national carrier Air Koryo is as unique as the country it serves. The state-owned airline operates limited cargo services using primarily older Soviet-era. The more mature ACW reader will be delighted to hear the names of historic aircraft types, such as the Ilyushin Il-76, which remain in use by the airline.
In fact, the whole fleet is a throwback to Soviet times. Air Koryo, North Korea’s national airline, operates a fleet consisting mainly of Soviet-era aircraft. These include the 1980’s Tupolev Tu-204, a Soviet-designed, medium-range, twin-engine jet airliner. The Ilyushin Il-62, a long-range, narrow-body jet airliner, introduced in the 1960s. This aircraft was once one of the most common long-range Soviet airliners.
The Tupolev Tu-154 is a narrow-body, three-engine jet airliner that was first introduced in the 1960s. The Tu-154 was widely used across the Soviet Union and its allies for both domestic and international flights. The Ilyushin Il-18 is a turboprop-powered airliner that was widely used in the 1950s and 1960s. The Il-18 is typically used for domestic and regional flights within North Korea.
Ironically, given the current military situation in Europe, the airline also uses Antonov An-148 occasionally. A more modern, regional jet produced by the Ukrainian company Antonov, which was introduced in the 2000s. Though not entirely from the Soviet era, its design lineage ties back to Soviet-era engineering, and Air Koryo has occasionally used this model in its fleet for domestic flights.
Air Koryo’s cargo operations are not extensive and focus on meeting domestic demands, humanitarian aid logistics and select international trade. From the airline’s website, it appears to offer just three routes from Pyongyang, the state’s capital, to and from the city. Just three routes are offered for choice: DPRK to Beijing and Shenyang in China and Vladivostok in Russia.
Major cargo operations are centred around Pyongyang Sunan International Airport, the country’s primary international hub. The airport has basic facilities to handle cargo, though these are not comparable to international standards in terms of technology and capacity.
North Korea’s airfreight activities are severely restricted by international sanctions. United Nations and other international bodies have placed stringent restrictions on North Korean imports and exports, particularly on dual-use goods (those with both civilian and military applications). The limited airfreight capacity is often monitored closely to ensure compliance with sanctions.
A significant portion of airfreight entering North Korea consists of humanitarian aid. Organisations like the United Nations and Red Cross co-ordinate shipments of food, medical supplies, and emergency aid to support vulnerable populations. Such operations often use chartered international aircraft rather than relying on North Korean carriers.
North Korea maintains limited airfreight trade with China and Russia. Freight operations are primarily for essential goods like food, medicine, and industrial supplies. Cross-border air cargo is minimal compared to overland or maritime trade.
Reports suggest that some North Korean airfreight operations have been implicated in smuggling activities, including the transport of prohibited goods like weapons, luxury items and materials for missile development. Such activities are carried out covertly and are a focus of international surveillance.
It is thought unlikely by industry observers that North Korea is using airfreight to directly support Russian troops in the Ukraine war, despite its high-profile supply of manpower to the conflict. There are factors that could suggest other forms of logistical support are being used.
North Korea’s airfreight capabilities are quite limited, lacking the modern airlift capabilities of larger nations, so it would be difficult for them to send significant supplies via airfreight.
There have been reports that North Korea may be supplying Russia with artillery shells and other munitions. However, these supplies are more likely to be sent overland or via sea routes, which are more viable for bulk transfers of military equipment. The land route through China or even maritime routes along the Pacific coast would be more practical for North Korea. Given the ongoing international sanctions against North Korea, any support provided to Russia would likely be conducted covertly. Airfreight would be easier to track, making it less likely as a means of direct logistical support.
Most reports suggest that North Korea has been involved in supplying Russia with conventional munitions, rather than offering large-scale logistical or operational support. These supplies are typically more suited to being transported by rail or sea to avoid detection. While airfreight could theoretically be used for smaller, more immediate transfers, it’s more likely that North Korea is using more discreet methods, such as land or sea transport, to support Russia in the conflict.
