2016 KOREAN AIR SUSTAINABILITY REPORT Sustaining Excellence ISSUE .1 Securing sustainable growth engines ISSUE .2 Ensuring safety on flight ISSUE .3 Promoting a healthy culture of communication ISSUE .4 Mitigating climate change ISSUE .5 Reinforcing customer relationship management Contents About this report Introduction About this report 04 Letter from the CEO Korean Air has been publishing sustainability reports every year since 2006, giving way to this year’s eleventh 06 Company Overview edition. Last year’s edition was printed in August, 2015, and all other previously published reports are 10 Sustainable Value Chain available on our homepage, both in Korean and English. 12 Vision & Management Philosophy This year’s edition was structured upon the framework of previous reports, while using the “Stakeholder 14 Corporate Governance Interview” and “Mini Case” to augment its coverage of issues concerning the business value chain in 16 Materiality Assessment Process reflection of the industry’s mega trend and stakeholder feedback. 18 Ethics Management Our annual sustainability report has always functioned as both an effective and transparent means of communication with stakeholders regarding material sustainability issues. Material Issue Report 22 Mega Trend of the Airline Industry Reporting Standards 24 Issue I This report was prepared in accordance with the “core option” of the GRI (Global Reporting Initiative) G4 Securing Sustainable Growth Engines Guidelines. The five key reporting issues were categorized accordingly as shown on the table on page 17 of 32 Issue II the report. Ensuring Safety on Flight 44 Issue III Reporting Period, Scope and Boundary Promoting a Healthy Culture of Communication This report covers the company’s sustainability management efforts and performance for the entirety of the 50 Issue IV 2015 calendar year with some performance results extending to cover the first half of 2016. There is also Mitigating Climate Change quantitative performance data going back as much as three years for trend analysis, dating back to 2013. 62 Issue V This report covers all Korean Air’s business premises at home and abroad, including the headquarters in Reinforcing Customer Relationship Seoul. Management Third-Party Assurance Sustaining Excellence The credibility of all information disclosed in this report has been adequately assured by a third party 72 Talent Recognition assurance agency, Korea Productivity Center, in accordance with AA1000AS (2008) guidelines. The 80 Customer Satisfaction Management assurance statement is attached at the end of this report in the Appendix. 88 Win-Win Management 90 Sharing Management Significant Changes from the Previous Year Appendix The limousine service was taken over by Korea Airport Services on February 1, 2015. 95 Key Sustainability Indicators 100 Third-Party Assurance Statement Further Information 102 GRI Index More information is available in the 2015 Business Report of Korean Air posted on our website (kr.koreanair. 107 UN Global Compact com), twitter (twitter.com/KoreanAir), facebook (facebook.com/KoreanAir), Blog (blog. koreanair.com) and 108 Major Awards and Memberships on the electronic disclosure system operated by the Financial Supervisory Service (http://dart.fss.or.kr). Korean Air has served the country’s need for airborne transportation as Korea’s national flag carrier while fulfilling its responsibilities to the economy, society and the environment. Going forward, Korean Air will remain at the forefront of the Korean aviation industry by “ actualizing a sustained profitability alongside the constructing of a stable growth platform. In the meantime, our open and creative corporate culture continues to pave the way for a sustainable growth as an industry-leading airliner. ” Letter from the CEO 04 Distinguished stakeholders, Non-scheduled services were also expand- ed on long-haul routes to Barcelona, Cal- I’m pleased to present to you the eleventh gary and Athens. edition of our report covering sustainability Meanwhile, the cargo business concentrat- management efforts and performance. On ed on enhancing its profitability in 2015, behalf of everyone at Korean Air, I’d like to feeding the pursuit of new markets in Latin deliver a heartfelt gratitude to you for your America and Vietnam, while also moderniz- continued support and encouragement. ing cargo fleet with the B747-8F and B777F, In 2015, Korean Air was faced with a chal- which were able to enhance fuel efficiency. lenging market riddled with unforeseen Notably, the aerospace business signifi- variables arising from the MERS outbreak cantly raised its revenue and operating prof- right in the run-up to its high-demand sea- it aided by the manufacturing of civil craft son and terrorist attacks around the world. components, like composite structures for Despite these challenges, we strategically the B787 and sharklets for A320, in addition adjusted our route operations amid falling to the developing of medium-altitude un- oil prices and rising market demands for air manned aerial vehicles (MA UAV) and the transportation as well as its volatility. As a upgrading of the performance of maritime Spreading joy result, we were able to generate a KRW 859 patrol aircrafts. throughout every corner billion operating profit. In meeting the volatile market environment of the world amid The passenger flight business channeled with a low-growth global economy, as well endless travels and its resources into creating a niche for pre- as the U.S. FRD’s rate hikes and geopoliti- mium customer services, adopting state- cal risks, Korean Air grounded its 2016 encounters of-the-art new aircrafts, like the B747-8i, management policy in the objective to not and increasing the fleet of A380 on major only achieve sustainable profitability, but routes. New routes were added to the cities also lay the foundation for the stable growth of Hefei, Nanning and Guiyang, helping re- of our company. While staying a step ahead inforce our service network in China. of the rapidly changing aviation industry, Korean Air 2016 sustainability report 05 Korean Air will lead the trend with its Remaining steadfast in its fulfillment of so- advice and encouragement from our stake- change-inducing and innovative new trend cial responsibilities, Korean Air offers its holders will be the key momentum that en- and value system. signature CSR programs like afforestation ables us to move forward, and we, at Korean in deforesting areas of China and Mongolia Air, would be grateful for your continued With that concerted effort working as our and sponsoring Korean language service at support. driving dynamic, we lay the groundwork for world-renowned museums. We also antici- a stable profitability, and while we further pate the continuation of disaster relief op- Thank you. the consolidation of our operational safety erations and patronization of various sports framework thanks to our thorough re- and cultural activities. 2016 sponse system, Korean Air continues to ad- As an ardent proponent of the UN Global Cho Yang-ho vance both its evolvement and progress Compact, Korean Air abides by all the ten Chairman & CEO Korean Air centering itself around a genuine form of principles concerning human rights, labor, customer-oriented service. the environment, and anti-corruption. As At the same time, our constructing a more such, we work hard to live up to our social open and creative corporate culture moti- responsibility in becoming that of a busi- vates us to revamp the entire administrative ness organization respected by its commu- and management system for bettered or- nity and stakeholders all around. ganizational efficiency and communication, which will be guided by the encouragement Over the past 46 years, Korean Air has been of active communication and consensus faithfully serving the country with its na- among all employees. We also work to- tion-leading air transportation business wards becoming even more receptive when and striving to fulfill its corporate social re- it comes to the voices of internal and exter- sponsibility through various environmental nal stakeholders so that we may success- management and social contribution activi- fully continue with the reforming of our cor- ties. Just as we’ve always done in the midst porate culture. of endless challenges, we will continue striding into a brighter future toward sus- tainable growth. While on this journey, the Company Overview 06 Profile Company Name Korean Airlines Co., Ltd. Air Fleet 158 aircrafts Headquarters 260 Haneul-gil Gangseo-gu, Seoul, Korea Routes 129 cities in 46 countries Phone Number +82-2-2656-7114 Revenue Passengers 24.86 million persons Carried in 2015 Website http://www.koreanair.com Revenue Freight Business Areas Passenger & cargo transportation, aerospace, Carried in 2015 1.55 million tons catering services and in-flight sales Subsidiaries See the disclosures by Korean Air on http://dart.fss.or.kr Sales KRW 11,308 billion 1) No. of Employees 20,938 persons 2) 1) Non-consolidated sales 2) Includes executives, expatriates and locally-hired employees Operating Revenue by Business (KRW in Billions) Air Transportation 3) Aerospace Catering 10,983 914 94 92 91 10,793 797 10,301 4) 638 2013 2014 2015 2013 2014 2015 2013 2014 2015 3) The air transportation revenue includes Hotel & Limousine operations, where Korean Air made in-kind contribution through its subsidiary, Aviation Total Services co., ltd. (Same classification applicable to the Audit Report) 4) Non-consolidated air transportation revenue