COUNTRY PROFILE

Yangyang Gimpo International Airport International Airport & Avjet Asia (FBO)

Incheon Wonju Airport International Airport Seoul

Cheongju International Airport Hanseo University Flight Education Center

Pohang Airport Daegu Airport

Ulsan Airport

Sacheon Airport

Muan Airport Gimhae International Airport International Airport

Domestic Airport

International Airport Jeju International Airport Training Field

14 | ASIAN SKY QUARTERLY — FIRST QUARTER 2017 COUNTRY PROFILE: SOUTH KOREA

SOUTH KOREA by Litalia Yoakum

After transforming itself from one of the poorest economies in the world Business Jet Fleet — Size Category Breakdown to one of the richest in just one generation, South Korea has positioned itself as an economic powerhouse. Preparing to keep up with the country’s swift development is the business aviation industry ready to Large 1 (5%) Long Range 6 (27%) cater to South Korea’s corporations and growing industry. Medium 1 (4%) Home to more than 50 million people, South Korea inhabits the southern portion of the mountainous Korean Peninsula, bordered by the Sea of Very Light 3 (14%) Japan and the Yellow Sea. After World War II, which coincided with the end of the Japanese occupation, the southern portion of the peninsula was created into the now-known democratic government (Republic of Korea, ROC), while the northern portion installed a communist-style 22 government (Democratic People’s Republic of Korea, DPKR).

Since its establishment under a democratic government, the country Light 5 (23%) Corp. Airliner 6 (27%) has thrived with innovation, manufacturing and technology becoming a competitive market with a highly-skilled workforce, opening the door for domestic and international business. Business Jet27 Fleet — OEM Breakdown +27231445+G Referred to as the “Miracle on the Han River”, for its rapid economic growth following the Korean War, South Korea now joins the ranks of the trillion-dollar club of world economies, an unofficial classification given to countries with a gross domestic product (GDP) of more than USD 1 Hawker 1 (4%) Cessna 8 (36%) trillion per year. As the fourth largest economy in Asia, Korea’s economy Airbus 1 (5%) is largely dominated by family-owned conglomerates (Chaebols) Bombardier 3 (14%) including the Samsung Group, Hyundai, LG Electronics and SK Group, though the country is now seeing the promotion of smaller enterprises and entrepreneurship and to break the Chaebol's grip on the economy.

In coming years, South Korea’s government faces challenges due 22 to a high reliance on exports, which comprise about half of Korea’s GDP, as well as a rapidly aging population, growing inequality and an inflexible labor market. Boeing 5 (23%) Gulfstream 4 (18%)

* Data Source: Asian 36Sky Group Fleet Report (Year-End 2016) +23181454+G While the country undergoes a period South Korea’s current turbulent political climate has caused widespread international attention, as the country’s first female president underwent of transformation impeachment over a corruption and influence-peddling scandal. An election for her replacement will take place 60 days from the March politically and 10th decision date for Korea’s Supreme Court to uphold or not her impeachment. Ongoing tension with the North has also left South Korea economically, several nervous, although the United States has affirmed its commitment to defend the country. industries are taking While the country undergoes a period of transformation politically and part in changes of economically, several industries are making changes of their own. In the business aviation sector, the country has the potential to expand further to cater to traffic brought on by the country’s vast business their own. opportunities. In 2018 the South Korean city of Pyeongchang will host the Winter Olympics, providing a prime opportunity for the country and the industry to illustrate this capacity to the world.

FIRST QUARTER 2017 — ASIAN SKY QUARTERLY | 15 COUNTRY PROFILE: KOREA

Business Jets — Top Operators by OEM

11 2 2 2 2 1 1 1

11+2 +2 +2 +2 +1 +1 +1 Total Center Korean Corporation SK Telecom Hyundai Motor Star AeroSpace Star AeroSpace LG International International LG Flight Inspection Hanseo University Hanwha Chemical Hanwha

Airbus 1 1 Boeing 2 2 1 5 Bombardier 2 1 3 Cessna 6 1 1 8 Gulfstream 1 2 1 4 Beechcraft 1 1 Total 11 2 2 2 2 1 1 1 22

Civil Helicopters — Top Operators by OEM

46

18 18 17 46+18+18+17+15+12+11+9+9+815 12 11 9 9 8 Total UI Helojet HeliKorea Fire Dept. Korean Air Korean Hongik Air Aero Peace Aero Coast Guard Forestry Dept. National Police Star Aerospace

Airbus 4 8 1 4 7 8 3 35 Bell 9 2 7 9 2 2 1 2 34 KAI 2 2 Kamov 30 4 2 8 2 46 Leonardo 3 3 3 2 4 4 19 MD 2 1 1 4 Mil 3 7 10 Sikorsky 3 1 3 1 1 4 13 Total 46 18 18 17 15 12 11 9 9 8 163

% of the total Korean fleet 73%

16 | ASIAN SKY QUARTERLY — FIRST QUARTER 2017 COUNTRY PROFILE: SOUTH KOREA

STATUS QUO Though a relatively small business aviation market, South Korea is actively Helicopter Fleet — Size Category Breakdown seeking to make a name for itself among the bigger markets in the Asia- Pacific region.

Heavy 14 (6%) Medium 121 (54%) At year end 2016, there were 22 business jets based in South Korea, up from 19 in 2015. Long range jets and corporate airliners each hold 27% of the fleet, suggesting most use is over longer distances. However, the Light Twin 29 (13%) shorter-range Cessna models are still the most popular, with 36% of the market share in the country. Overall, the fleet is young, with the majority manufactured in the past decade. Single 59 (27%) Korean Air is the largest operator in the country by far (50% of the fleet), with 223 11 aircraft including two BBJs, two Global Express XRS’, six Cessnas and one G650. Samsung Group previously held the largest fleet in the country, but sold their entire fleet to Korean Air. Samsung is now exclusively using charter services provided by Korean Air.

As far as jet charter, Aviation Business International Services Korea (ABIS.KOREA) explained that business jet charter services in Korea are 54+27136+G geared towards the large companies based in the country, however larger conglomerates including SK Group, Hyundai, Hanwha and LG Electronics Helicopter Fleet —OEM Breakdown have their own aircraft. 2016 also saw a new charter company join the market. Star Aerospace established a charter business with the purchase of a Cessna Citation 500. KAI 2 (1%) Enstrom 2 (1%)

“Most business jet charter passengers are foreigners coming out of Korea, MD 8 (4%) not Korean residents,” says ABIS.KOREA. “However, the Seoul Gimpo Mil 12 Airbus 56 (25%) Business Aviation Center (SGBAC), the first business aviation terminal, (5%) opened in March 2016. It was developed by the Korea Airports Corporation. Leonardo 21 (9%) This will help to develop the business jet market, charter and business aviation within the country.”

Sikorsky 27 (12%) 223 Helicopter Fleet — Mission Breakdown

Bell 45 (20%) Kamov 50 (23%)

Offshore 3 (1%) Charter 2 (1%) EMS 9 (4%) 25+2320129541+G Law Enforcement 15 (7%) Multi-Mission 154 (69%) At year end 2016, there Corporate 17 (8%) were 22 business jets SAR 23 (10%) based in South Korea, 223 up from 19 in 2015. Long range jets and corporate airliners each

* Data Source: Asian69 Sky Group Fleet Report (Year-End 2016) +108741+G hold 27% of the fleet.

FIRST QUARTER 2017 — ASIAN SKY QUARTERLY | 17 COUNTRY PROFILE: SOUTH KOREA

At present, Taiwan’s economic, commercial, cultural, technological, agricultural and tourism are inseparable from China.

INFRASTRUCTURE CHALLENGES military-operated airports require a 7-day notice. Air congestion often occurs at Incheon and Jeju and it is often difficult to secure slots for There are over a dozen airports in Korea, however only a few adequately overnight parking.” serve business aviation needs. These are Seoul’s Incheon International Airport and Gimpo International Airport, as well as Jeju International Korea’s business aviation industry could also be more successful Airport and Busan’s Gimhae International Airport. with a domestic aircraft management company. “There’s no aircraft management company in Korea,” says Son. “Therefore, a person or Although the fleet only saw minimal growth, 2016 was an important corporation needing a corporate jet or company commute, must year for the industry. establish their own aviation team. To operate an aircraft, they need at least 10 employees, including three pilots and it will cost at least $2.5M “Korea Airports Corporation (KAC), a government investment company, USD annually for employees alone. Once an aircraft management opened the first business jet dedicated facility on June 16 2016,” explains company is established, that company can manage the aircraft and Mr. Kyung Ho Kim, Ph.D from Korea Aerospace University and member the aviation team. More prospects would then be more willing to buy of the Korea Aerospace Policy Research Institute. “Operating 14 Airports jets, without having to worry about management, hiring employees and in Korea, KAC invested approximately 4.5M USD into the Seoul Gimpo aviation law.” Business Aviation Center (SGBAC). The facility was constructed by the Ministry of Land, Infrastructure, and Transport (MOLIT) and KAC to meet the needs of an increasing number of flights to Korea as well as ROTARY MARKET to develop the nation as the business aviation hub in northeast Asia. At year end 2016, the civil helicopter fleet stood at 223. This is significant It includes a VIP terminal which has available on-site CIQ clearance, growth from 2014, when the fleet was 206 and year end 2015 when the and a 10,260㎡-large hangar that can accommodate up to 10 G550, with fleet was 210. Most of these helicopters are involved in multi-mission parking as well as maintenance support offered.” operations, making up 69% of the fleet, followed by those used for SAR operations, with 10% of the fleet. The new terminal will be a catalyst for growth in Korea’s business aviation market. Still, the industry needs more than one airport dedicated Of the 223 helicopters based in South Korea, nearly 40% of the aircraft to the industry. are operated by the Government Forestry Department, Regional Fire Department and Coast Guard for firewfighting, agriculture spraying and As aviation consultant Hyunbae Son explains, “The expansion of Jeju SAR operations. and Busan airports is quite an urgent situation. Most business jet flights have to relocate to Gimpo because [business jet] parking slots “For civil operators, all major markets including firefighting and cargo are limited due to commercial flights.” lifting are saturated,” says HeliKorea Managing Director, Scott Min. “Firefighting operations remain the largest market in Korea, in terms Kim agrees, stating “The main destinations for business jet travelers of sales but supply and demand is currently met within this segment. to Korea are Incheon International Airport, Gimpo and Jeju. For the Although, the Government is now requiring medium and heavy- permit, civil-operated airports need at least a 2-day notice, while sized helicopters.”

18 | ASIAN SKY QUARTERLY — FIRST QUARTER 2017 COUNTRY PROFILE: SOUTH KOREA

The transaction timeline is often lengthy though. “Although the Korean helicopter fleet has the potential to expand, replacement costs for these helicopters is high and requires a long process to pass the budget for purchasing new aircraft,” explains Min.

There are 17 operators with three or more helicopters in their fleet. The largest operator remains the Ministry of Forestry, operating 46 helicopters, of which 30 are Russian built Kamov helicopters. HeliKorea and the Fire Department remain in their top spots, with 18 helicopters each. HeliKorea is the largest private operator, followed by Korea Airlines and Hongik Air.

Airbus Helicopters holds the largest share of helicopters in the country, with 56 (25% of the fleet). Kamov follows with 50 helicopters (23% of the fleet.) Out of all the Asia-Pacific countries, Russian-designed helicopters in South Korea have the strongest presence, in terms of the number of helicopters in operation.

TOURISM

According to South Korea’s Ministry of Land, Infrastructure and Transport (MOLIT), as of December 2016, “The country’s air passenger traffic reached 50 million in 2007, 20 years after it reached over 10 million in 1987. And now, just nine years since reaching the 50 million mark, the country’s air passenger traffic has reached over 100 million.” The increased traffic levels are attributed to both international and domestic travel.

For years, Chinese tourists have flocked to the country, driving up traffic levels while enjoying the sights of Seoul, Busan and other areas Although the Korean throughout the country. But times have changed, as Korea-China relations are on edge over the planned deployment of the American helicopter fleet has missile defense system, Terminal High Altitude Area Defense (THAAD).

the potential to “As the placement of THAAD is scheduled for September, trade restrictions from China have started to materialize,” explains Hyunbae expand, replacement Son. “The number of Korea-China travelers has decreased by 27% costs for these from September 2016 to January 2017. Amid this tension, the Korean tourism sector is expected to see heavy helicopters is high. economic effects. Korean state media has since reported that China’s national tourism administration has advised travel agencies to stop selling group packages from Beijing to South Korea.

Agreeing with this is MasterTech International President, Sam Chae, whose company works with Sikorsky to provide helicopter services for Korea’s commercial helicopter market and spare parts for the military, as well as providing flight training services.

“Several commercial companies in Korea are heavily targeting the government forestry standby business,” explains Chae. “These companies often work with the Korean Government, including national and provincial governments, who hire helicopters for firefighting standby. This business is booming and companies are making good profit from this. “

While forestry operations do particularly well in Korea, other operational segments are picking up too, as part of a government plan to expand search and rescue (SAR) and emergency medical service (EMS) operations. Additionally, helicopters for VIP and corporate use are often utilized by large Korean conglomerates including SK Group, LG Electronics and Hanwha.

FIRST QUARTER 2017 — ASIAN SKY QUARTERLY | 19 COUNTRY PROFILE: SOUTH KOREA

FUTURE EXPECTATIONS

For a country amidst scandal and turmoil, the upcoming 2018 Winter The notion that Olympics in Pyeongchang is a chance for the country to showcase its capacity. business aviation “With the opening of the dedicated facility last year at the Gimpo and business jets Airport, the interest in business aviation is gradually rising, including policy makers that are managing the industry, potential customers for are exclusively for business jets and suppliers that provide the products and services,” says Kim. “We predict a substantial increase of potential customers, including the wealthy must major enterprise business owners, but also small and medium-size enterprises, especially in the manufacturing field, IT and service.” be erased. For the industry to continue to grow, Kim believes the notion that business aviation and business jets are exclusively for the wealthy must be erased and business aviation needs to be seen as “an industry contributing to creating jobs and creating economic growth. Business jet use should be nurtured in Korea, and considered as an efficient tool for business.”

“Investment from the government should continue, and regulations for business jets should be developed further,” claims Kim. “This is to build a foundation for an environment that the public will be exposed to, so that they will fully understand the industry and acquire an increased awareness. When this happens, we will grow fast like Mainland China and Hong Kong has.”

Fleet by Age 223 in Total

20

18

16

14

12

10

8

6

4

2

0 1957 1960 1964 1970 1974 1980 1984 1990 1994 1958 1962 1972 1982 1992 2000 2004 2010 2014 1966 1969 1976 1979 1986 1989 1996 1999 2002 2012 1958 1961 1971 1981 1991 2006 2009 2016 1965 1975 1985 1995 2001 2011 1963 1968 1973 1978 1983 1988 1993 1998 2005 2015 1967 1977 1987 1997 2003 2008 2013 2007 Year of Manufacture

20 | ASIAN SKY QUARTERLY — FIRST QUARTER 2017