Korean Air's flight path to decarbonization: an interview with Noh Kyu-young

The urgent need for multilateral commitment to address the climate crisis has pressured several industries to reduce their carbon footprint. One such industry is the aviation sector, wherein decarbonization has become one of the most pressing financial and operational challenges. In this interview, Noh Kyu-young at Korean Air's Finance Team discussed the airline's recent carbon reduction efforts and the rising regulatory pressure that airlines are challenged to comply with.

How significant are carbon emissions in the aviation industry?

Actually, fuel costs account for the largest portion of an airline’s expenses. Fuel costs make up a very large portion—over 30%—and then, aside from fuel costs, aircraft are extremely expensive assets. Consequently, aircraft generate a significant amount of emissions. Additionally, since there are many maintenance-related issues when operating aircraft, maintenance costs are high. Furthermore, because a large workforce—including flight attendants and other personnel involved in aircraft operations—is required, labor costs are also substantial. Overall, there are high fixed costs, but as I mentioned earlier, fuel costs account for the largest portion. Therefore, within fuel costs, external factors, particularly regarding carbon credits, are becoming increasingly important. 

You’ve likely heard of Sustainable Aviation Fuel (SAF). It’s not simply a matter of using fuel supplied by oil refiners; each country now mandates the use of sustainable fuel, starting at a minimum of 1% to 2%, and this percentage is gradually increasing. This requirement means airlines must now purchase and use more expensive fuel to meet these quotas. Consequently, this is an area of great interest to the company—not just for Korean Air, but for airlines worldwide. Everyone is currently grappling with how to operate in an environmentally friendly manner.

Could you explain whether SAF is actually reducing carbon emissions, and if so, to what extent?

Actually, we’re still in the early stages. It’s just getting started. In fact, since last year, countries around the world—such as the UK and various EU nations—have made it mandatory for airlines to use SAF. For example, if an aircraft is taking off or landing in those countries, airlines are required to blend about 1% SAF into their fuel mix. So, if they don’t include that 1%, they can’t operate. However, if that 1% is significantly more expensive than regular fuel, the cost burden is ultimately increasing compared to past performance.

But for now, since SAF accounts for only 1% or 2% at most, so it’s still manageable. However, since countries are now requiring a higher proportion by 2030, if we don’t prepare for this in advance, it could become a significant burden on the company later on. So, as we mentioned earlier, it’s not just about fuel costs; we’re also purchasing and operating aircraft at a high cost. If you ask why we’re paying so much, it’s not just because the aircraft are new but rather because they are fuel-efficient models that allow us to reduce fuel costs.

That’s why, whereas in the past we had to fill up with 100 units of fuel to cover the same distance, we’re now purchasing new aircraft models that can fly the same distance with just 70 to 80 units of fuel. So, while the initial purchase price may be high, the ability to travel farther on less fuel helps alleviate the fuel cost burden caused by SAF. And the reason the proportion of SAF is increasing in each country is ultimately part of a global effort to reduce carbon emissions. And as I mentioned earlier, people generally assume that the aviation industry has the highest share of greenhouse gas emissions. Even if you simply compare cars—or not just cars, but ships as well—people assume that as modes of transportation, they must produce a lot of carbon emissions due to fuel costs. But in reality, while it’s true that aviation has very high emissions per passenger, in absolute terms, the number of flights is actually lower than that of cars or ships, so the total volume isn’t as high. 

However, it is an industry with extremely high emissions per passenger. Structurally, cars are transitioning to electric vehicles and hydrogen-powered vehicles. Ships will likely change in a similar way. Alternatively, there will be routes where ships can operate more efficiently using wind power, but that’s difficult for aircraft. For example, the idea of flying in an electric aircraft is a bit scary, isn’t it? Because safety is so directly tied to it, aviation is the most difficult industry to decarbonize in practice. Ultimately, as I mentioned earlier, the aviation industry is responding by adopting SAF and introducing aircraft with high fuel efficiency.

Apart from aircraft fuel, what other carbon reduction efforts are relatively easier to implement, such as route optimization or aircraft lightweighting?

Actually, what you just mentioned are the efforts the company is currently focusing on the most. In reality, using fuel-efficient aircraft or optimizing flight routes is crucial because, in a way, the more aircraft we keep in the air, the more carbon emissions we generate. For example, if I’m flying from here to the UK, even if we can reduce the flight time by just an hour or two by planning the route very carefully, we can cut carbon emissions. So, as you mentioned, optimizing flight routes is extremely important. However, due to the current situation with Russia, the most efficient route actually used to be one that passed through Russian airspace. Since we can’t fly over Russia, we have to take a detour around it. As a result, flight times to the U.S. and Europe have increased significantly—the U.S. is somewhat manageable, but flights to Europe have definitely become much longer.

Realistically, determining which option is most efficient requires a great deal of consideration. Beyond these efforts, there is the Korean Air Cargo website, in addition to the passenger site. Since regular passengers typically don’t use it, the cargo site may be unfamiliar, but on the Korean Air Cargo site, shippers log in to transport items like batteries or various other goods—even horses. Among these, there are companies called “forwarders.” We’re running promotions and collaborative initiatives with these forwarders, encouraging shippers to join us in reducing carbon emissions. We’re doing this because all companies are required by the government to purchase carbon credits and submit them as part of their obligations.

Therefore, through the carbon emissions trading system, if a company cannot meet its allocated quota, it must purchase credits from the market and submit them. However, if shippers use Korean Air cargo flights and participate in this program, the company provides them with a certificate for that effort. By issuing these certificates to participating companies, we demonstrate that they have made efforts to reduce carbon emissions. This helps build a positive image of social responsibility and serves as proof of their efforts to reduce emissions when reporting to the government. Ultimately, we’re also making marketing efforts to encourage shippers to continue participating.

It seems like a tremendous amount of effort is being put into this. As you mentioned earlier, passengers and the general public tend to think that flying generates a lot of carbon emissions. From the perspective of the general public or passengers, do you think there are other ways to communicate these carbon reduction efforts by airlines like Korean Air more transparently or to encourage participation?

The reality is that passengers want to buy the cheapest ticket, even for the same route. After all, if they’re going to the U.S., whether they use this airline or another, the best price is what matters most. But even if it’s more expensive, they might think, “This company is doing a good job reducing carbon emissions, so I should use them,” but it’s not easy to actually act on that thought. And the fact is, fuel costs depend heavily on the price of fuel. Exchange rates matter too, but that’s why—since fuel is ultimately purchased from overseas—as you know, if there’s an issue in the Middle East and the unit price of fuel rises, passengers end up paying higher airfares due to fuel surcharges. Yes, but if the required proportion of SAF increases by country, that cost could eventually be passed on to customers as well. That’s why I don’t think the concept of reducing carbon emissions really resonates with customers.

However, as you mentioned, it’s crucial that these efforts are clearly communicated to customers. Since the company is still in the preparatory phase, while these initiatives are reflected in our sustainability reports under corporate social responsibility, it’s currently difficult for customers to directly perceive that “this company is doing a good job” or “that company is doing well.” If you have any good ideas, please feel free to suggest them. In fact, actively providing feedback to the company is even more important because the company monitors customer service very closely. Now more than ever, it’s crucial for people to listen to the voice of the customer so that we can create better services.

Finally, from the perspective of a major airline like Korean Air, at a time when environmental issues are becoming increasingly severe, what concerns or hopes do you have regarding balancing the cost burden of adopting new technologies like SAF with the environmental benefits?

Well, people are gradually becoming more aware of SAF now. But ultimately, the most critical current issue—more important than SAF—is the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). Let me explain what this is. Even before CORSIA, countries like South Korea, the EU, and the UK had already been mandating carbon emission quotas for airlines on a national and airline-by-airline basis. They’re saying, “Since your aircraft have been flying to and from our routes—EU and UK routes—multiple times a year, you’ve emitted a significant amount of carbon, so you must purchase carbon credits and submit them.” They’re mandating these quotas and requiring submission. In reality, interest in this area emerged after the Kyoto Protocol and the climate agreement around 2005, but there was talk that corporate burdens would eventually increase through the carbon emissions trading scheme would increase the burden on companies, but now, about 25 years later, that pressure is really starting to mount on companies. Twenty years have passed. 

But now, it’s no longer just a matter of individual countries or regions; there’s an international organization called ICAO. All airlines are required to follow the various regulations established by ICAO regarding safety, ticket prices, and other matters. Now, ICAO has also stepped up to implement global carbon regulations. As a result, airlines are now obligated to purchase emission allowances and submit them every three years to meet their emission quotas, so the pressure from ICAO is extremely high. Consequently, even before the three-year cycle begins, the company is already factoring these costs into its budget every single year. However, the rate at which these costs are rising is extremely steep. We now have an obligation to submit these emission allowances—which we refer to as CORSIA—and if we purchase and use a sufficient amount of SAF, we can receive some benefits when submitting those allowances.

So, ultimately, the company’s primary requirement is to settle its emissions every three years. Since the settlement amount is now so large, the company is recognizing these costs annually. At the same time, we’re purchasing new models to improve fuel efficiency and reduce carbon emissions through low-carbon initiatives. Along with this, we’re intentionally purchasing SAF to use as an eco-friendly fuel, but ultimately, all just preparatory measures to address the CORSIA regulations anyway.

That is why the CORSIA regulations are currently the top priority for all companies—it’s what they’re most focused on right now. And while SAF and other measures are important, the biggest pressure is on addressing the CORSIA regulations, and companies are striving to respond effectively to them.