South Korea's flag carrier seeks synergy with potential acquisition of Korea Aerospace

Korean Air is speeding up efforts to nurture the aerospace business as its future growth engine, unveiling yesterday a plan to create a 1-million-square-metre industrial cluster in Busan by 2020.

Adding to its existing 710,000-square-metre tech centre, established in 1976, the nation's largest flag carrier plans to set up a new 230,000-square-metre centre and related facilities at another 150,000-square-metre site in the coming years.

Korean Air is the only air carrier in the world that both produces and repairs aircraft. The new facilities will house factories for aircraft assembly, structure manufacturing and other research and development activities, officials said.

The company, with an injection of 1.5 trillion won (US$1.3 billion) in the expansion project, aims to increase its current 600 billion won sales in the aerospace sector to 1.6 trillion won in 2017 and 3 trillion won in 2020.

"We plan to elevate our aerospace business to the stage, in which we can produce mid-sized airplanes for ourselves by 2020," Korean Air president Ji Chang-hoon told reporters.

"About 50 per cent of the global airplane market is dominated by Airbus and Boeing, and Korean Air spends 2 trillion won every year buying their planes. Based on our buying power, we also could secure orders from both companies."

The company also expected to create synergy with its potential acquisition of the nation's sole aircraft maker Korea Aerospace Industries (KAI).

Korean Air joined the bidding war to buy KAI in August and the race gained fresh momentum with the unexpected participation of Hyundai Heavy Industries in September.

The final bid is scheduled to start on November 30.

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Korean Air to expand aerospace business