Aviation and Aerospace to Korea

Trends and opportunities

The market

The aerospace industry is a sector of focus for the Korean government. The sector grew by 13% from 2010 to 2016, reaching US$5.1 billion revenue in 2016. The Korean government has plans to develop the country into an aerospace powerhouse with a vision to develop future core technologies, expand into new markets and create an ecosystem for industry growth. 

In commercial aviation, Korea has witnessed a rise in Low Cost Carriers (LCC) entering the market over the last five years. LCCs now carry over 30% of all international passengers and over 57% of domestic passengers in the market. In 2018, Korea’s airports serviced over 110 million passengers. This rapid growth in the aviation industry results in increased demand for Maintenance, Repair and Overhaul (MRO) capability.

In the space sector, the Korean government is seeking to support growth through partnerships with the private sector. The government is ensuring its policy supports providers to expand both domestically and internationally, and to strengthen the competitiveness of space companies.

Aerospace

The Korean government launched the Aerospace Industry Development Plan in April 2017. The aim of the plan is to build a US$23 billion industry by 2025. (Source: Korean Government, Ministry of Trade, Industry and Energy, Media Press Release 18 April 2017)

The plan is divided into three strategies:

  • Securing future core technologies of the aerospace industry consisting of plane engines, avionics and new lightweight materials
  • Expanding in existing global markets and entering new markets
  • Creating a convergence platform and ecosystem for the growth of the aerospace industry in Korea.

The country’s aerospace industry has two system integrators – Korea Aerospace Industries (KAI) and Korean Air. Both primes lead the country’s 100+ aerospace companies to make and assemble parts for their international customers including Boeing, Airbus, Spirit, Bombardier, Vought, and Embraer.

KAI and Korean Air are also active in developing Korean local aircrafts, including Unmanned Aerial Vehicles (UAV), rotor-wing and fixed wing aircrafts, and in providing MRO services for both commercial and defence aircrafts.

In collaboration with Lockheed Martin, KAI won the KF-X project – Korea’s next generation fighter jets – in 2015. The Korean government has committed US$17 billion to the KF-X program.

Aviation

Korean Air is the country’s largest passenger and cargo carrier and is the largest consumer of aircraft, equipment, components, including aerospace services. Asiana Airlines is a close second.

In addition to Korean Air and Asiana Airlines, there are six LCCs carrying 30% of all international travellers (mostly travelling to China and Japan) and 57% of domestic travellers in 2016.

LCCs continue to grow in Korea with annual sales up 40% in the past five years. The LCCs in Korea are expected to introduce at least 25 new aircraft to their fleets in the next few years and secure new medium and long-range international routes. In addition, the Korean government is currently reviewing the applications of four new LCCs. Results of this review will be released in the first quarter of 2019. (Source: Seoul Finance, “Korean Aviation Industry 2018 in review”, 29 December 2018)

Korea has two state-owned airport companies, Incheon International Airport Corporation (IIAC) and Korea Airport Corporation (KAC). Incheon Airport has won Airports Council International’s “The world’s best airport award” in 2018 for a record 12th consecutive years. It has also received the highest score in the Airport Service Quality (ASQ) category by the Airports Council International (ACI). With its second terminal completed in 2018, Incheon Airport can now accommodate 62 million travellers per year. KAC operates a total of 14 airports across Korea, of which seven have international status with routes focusing on destinations in North East Asia.

Korea’s MRO market has been growing rapidly in recent times due to the growth in demand for air travel and is expected to reach US$4.64 billion in revenue in 2025. However, half of the Korean fleet are serviced outside Korea, with the exception of the defence fleet and those of Korean Air. (Source: Korean Government, Ministry of Trade, Industry and Energy, Media Press Release 18 April 2017)

Space

The total market size of the Korean space industry is US$2.41 billion in 2016, most of which can be attributed to the telecommunications, broadcasting and navigation sectors.

The Korean government is focused on growing the space sector in the country, specifically the manufacture of space equipment, and derived services using satellite data. This emerging sub-sector has a market size of US$205 million comprising small and medium-sized enterprises that are in the early stages of industrial development. The Government’s Korea Space Industry Strategy, released in January 2019, seeks to increase the size of the sector to US$3.3 billion by 2021. The strategy will transfer responsibility of the space development program from government to the private sector, providing policy support to expand domestic and export markets, and strengthen the competitiveness of space companies. (Source: Money Today, “Role of Industry in Korean Space ecosystem”, 9 January 2019)

The key focus of the country’s space program is to develop national technological independence in space activity, particularly for space launch and satellite production.

In March 2018, the government announced the Core Space Technology Roadmap 2.0 to develop 235 key space technologies related to the main body of satellites, payload of satellites, the main body of Satellite Launch Vehicles (SLV), SLV engines and space exploration.(Source: iNews24, “Release of Korean Space Technology Roadmap 2.0”, 28 March 2018)

Opportunities

Korea’s aerospace sector is dependent on the importation of commercial aircraft, commercial aircraft engines, equipment and parts, military aircraft and their parts, and components. Given the expected growth of LCCs in Korea, and due to Korea’s recent decision to purchase 40 F-35s and other defence aircraft, the demand is likely to continue for some years.

Products and services with high market demand include aircraft upgrades, radar and surveillance solutions, avionics, high performance sensors, parts and components.

Australian companies with MRO capabilities may be able to supply services to Korea, who has a significant and open MRO market – with historically half of these services coming from overseas.

Despite innovative technologies, the growth of the UAV sector in Korea has been restricted by regulations limiting the ability to test and trial new technologies. This creates opportunities for Australian companies with established commercial solutions. (Source: Korean Government, Ministry of Trade, Industry and Energy, Media Press Release 18 April 2017)

Korea’s space market presents opportunities for foreign suppliers especially in satellite launching services, high-tech sensors and optical devices for the payload systems. There is potential to build on past collaborations between the Australian and Korean space sectors as both are supported by respective government polices focused on growing the sector.

Marketing your products and services

Market entry

To successfully enter the Korean market, it is crucial that foreign organisations have a local partner to gain access to supply chains.

Korean government and business conglomerates prefer working with local suppliers who have a thorough understanding of their requirements and the regulatory environment. These partnerships will also assist in overcoming non-tariff barriers, language barriers and navigating the complexities of these sectors.

Recognised as the future growth engine of Korea, Research and Development (R&D) collaborations are on the rise in the aerospace industry. Government funded projects such as KFX and Project 425 are providing additional opportunities for international companies.

Links and industry contacts

 

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