Skip to main content
Top

2019 | OriginalPaper | Chapter

6. Restructuring and Continuity in the Aircraft Industry

Authors : Seungjoo Lee, Sang-young Rhyu

Published in: The Political Economy of Change and Continuity in Korea

Publisher: Springer International Publishing

Activate our intelligent search to find suitable subject content or patents.

search-config
loading …

Abstract

Until 1960s, Korea primarily concentrated on improving the maintenance capability of military aircrafts, starting with the overhaul maintenance of the L-19 reconnaissance aircraft in 1955 (Korean Association of Aircraft Industry 2015). The Korean aircraft industry entered a new stage in the mid-1970s when it first began to seek coproduction. In the early 1970s, facing increasing security threat from North Korea, the Park government started internal discussions to examine the feasibility of indigenous development of aircrafts to improve self-reliant defense capability. The Park government carried out the modernization program of aircrafts in accordance with the “First Force Improvement Plan” to replace obsolescent F-5A and F-86. The Park Chung Hee government sought the coproduction of the “First F-X project” in order to modernize the defense capability of the Korean Air Force. While proceeding to acquire F-16, the Park government cautiously probed the possibility of coproduction. While the Park government attempted to coproduce both F-16 and F-5E/F, it could run the coproduction project of F-5E/F because the Jimmy Carter administration attempted to control arms transfer (Nolan 1986: 30-31). Although the Park government’s attempt was half-successful, it reflected the Korean government’s long-term goal of enhancing indigenous capability of the defense-related industries (Um 2016).

Dont have a licence yet? Then find out more about our products and how to get one now:

Springer Professional "Wirtschaft+Technik"

Online-Abonnement

Mit Springer Professional "Wirtschaft+Technik" erhalten Sie Zugriff auf:

  • über 102.000 Bücher
  • über 537 Zeitschriften

aus folgenden Fachgebieten:

  • Automobil + Motoren
  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Elektrotechnik + Elektronik
  • Energie + Nachhaltigkeit
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Maschinenbau + Werkstoffe
  • Versicherung + Risiko

Jetzt Wissensvorsprung sichern!

Springer Professional "Wirtschaft"

Online-Abonnement

Mit Springer Professional "Wirtschaft" erhalten Sie Zugriff auf:

  • über 67.000 Bücher
  • über 340 Zeitschriften

aus folgenden Fachgebieten:

  • Bauwesen + Immobilien
  • Business IT + Informatik
  • Finance + Banking
  • Management + Führung
  • Marketing + Vertrieb
  • Versicherung + Risiko




Jetzt Wissensvorsprung sichern!

Footnotes
1
The Korean government skillfully took advantage of off-set programs in the purchase of foreign aircrafts as a means to enhance its R&D capabilities. In purchasing KF-16, for example, the Korean government could use off-set programs to improve manufacturing capacities for forward fuselage (Cho 2000).
 
2
For the concise summary of the development history of the Korean aircraft industry, see Cho 2003 and Korean Association of Aircraft Industry 2015.
 
3
Cho assesses that the current status of the Korean aircraft industry reached the stage between international cooperative development phase and independent development phase (Cho 2000).
 
4
For a comprehensive overview of the structural reform after the crisis, see Shin and Chang (2003).
 
5
Nonetheless, the restructuring process was full of uncertainties and conflicts. The aircraft engine division of Samsung and aerospace manufacturing division of the KAL did not participate in the KAI to seek independent survival. In particular, the KAL was adamantly opposed to the merger, arguing that it was unreasonable to merge with the three companies in trouble.
 
6
Experts were highly critical of the move made by the government: they thought that the Korean government unduly backed the KAI that was created by the government initiative, violating market principles.
 
7
In 2006, the Korea Development Bank (KDB) became the major investor by injecting 210 billion won into the KAI. In 2009, the KDB possessed 30.5% of the KAI’s share.
 
8
Since the establishment of the KAI, the KAL was in trouble in expanding its business into defense sector.
 
9
It is equivalent to about 500 billion won.
 
10
It was reported that Hanhwa Techwin decided to expand the engine component business by pursuing overseas M&As instead of taking over the KAI (The Korea Herald January 6, 2016)
 
11
It was a massive investment given that the total production amount of the domestic aircraft industry was just about U$200 million at that time.
 
12
While Korea has nurtured aircraft industry for the last four decades, it has also imported commercial and defense aircrafts and their parts and components. In 2012, Korea imported about USD 3.8 billion. In 2014, the amount of import has increased to USD 4.05 billion. The US companies are the largest export to Korea as demonstrated in the fact that they accounted for about 40% of the Korea’s entire import in 2014.
 
13
The review was based on the report by the Korea Development Institute that was critical of the KFX development.
 
14
Korea planned to purchase forty F-35 in 2018 and may purchase additional twenty aircrafts, depending on the required operational capability.
 
15
The Korean Air Force uses T-50 for advanced pilot training.
 
16
The development of the space sector is relatively retarded compared to the aircraft sector, accounting for the about 10% of market share in the entire aerospace industry. To address the industrial setback, in 2016, the Korean government drew up the Mid-to-Long Term Space Development Plan which included a detailed development plan of the space industry. The plan specified that it was needed to build up KSLV-II (Korea Space Launch Vehicle- II) by 2020 to increase satellite exports, of which the prime goal is.
 
17
The KAI modified the T-50 into the FA-50, which is the light attack version of the T-50. The T-50 has several variants such as FA-50, T-50B (Advanced Maneuverability Aerobatic Plane) and TA-50 (Lead-in Fighter Trainer). The TA-50 is a variant equipped with a multi-mode radar, swing role capability of intercept and Close Air Support (CAS) and key A/A and A/G weapons (KAIA 2015).
 
18
With this contract, Korea became sixth country to export a supersonic aircraft in the world.
 
19
The contract amount was about 402 million US dollars (Parameswaran 2015).
 
20
It includes 2 trillion won sales for civilian aircraft components with the Boeing and Airbus (Kim 2014).
 
21
The number of T-50 produced by the KAI reached 200 units in 2015 ten years after it began to produce (Korea Economic Daily 9/8/2015).
 
22
The KAI successfully completed the system development of T50 that had begun in 1997.
 
23
The KF-X project, launched in 2015, will take up the substantial share as its development cost is expected to be about USD 8 billion (Joongang Daily 2016/1/22).
 
24
For example, the Korean Aerospace Research Institute developed unmanned tilt-rotor aircraft to transfer to the Korean Air Line (KAL) for commercialization.
 
25
At the global level, major players show a greater tendency to collaborate with foreign partners as risks and uncertainties have increased in various stages from R&D to production. They actively seek to form international collaboration to reduce the risks and uncertainties (Cho 2000).
 
26
The development costs will be 650 billion won and 350 billion won, respectively. Domestic companies and Airbus Helicopter will share the development costs by investing 200 billion won and 400 billion won (Joongang Daily 6/26/2015).
 
27
The KAI says that the development of the KFX will be completed by 2025 and the deployment will begin from 2032 (Kwaak 2015).
 
28
However, the development process will likely to face serious obstacles because the US government decided not to transfer four core technologies including Active Electronically Scanned Array (AESA) Radar (Joongang Daily 1/22/2016).
 
29
The KAI was awarded by Boeing as the Supplier of the Year in 2010 and 2012 (KAIA 2015).
 
30
In the case of the KAI, defense sector and civilian sector account for 67% and 33% of the KAI’s sale, respectively (Chosun Biz April 4, 2016).
 
Literature
go back to reference Ahn, Seok-hyun. 2012. The Product of the ‘IMF’ Big Deal. BizChosun. September 27 (in Korean). Ahn, Seok-hyun. 2012. The Product of the ‘IMF’ Big Deal. BizChosun. September 27 (in Korean).
go back to reference Airbus Selects Korean Air Aerospace to manufacture Sharklet wingtips for the A330neo Family. 2015. http://www.airbus.com/newsroom/pressreleases/en/2015/04/airbus-selects-korean-air-aerospace-to-manufacture-sharklet-wingtips-for-the-a330neo-family.html. April 23. Airbus Selects Korean Air Aerospace to manufacture Sharklet wingtips for the A330neo Family. 2015. http://​www.​airbus.​com/​newsroom/​pressreleases/​en/​2015/​04/​airbus-selects-korean-air-aerospace-to-manufacture-sharklet-wingtips-for-the-a330neo-family.​html.​ April 23.
go back to reference “Back to Square One Due to Rejection of F-15 SE.” 2013. Business Korea. September 25. “Back to Square One Due to Rejection of F-15 SE.” 2013. Business Korea. September 25.
go back to reference Basic Plan for the Aircraft Industry Development. 1997. https://www.kari.re.kr/kor/sub04_02_01.do (in Korean). Basic Plan for the Aircraft Industry Development. 1997. https://​www.​kari.​re.​kr/​kor/​sub04_​02_​01.​do (in Korean).
go back to reference Byun, Wanil. 2014. Current Status and Forecast of Domestic Aircraft Industry. Current Industrial and Technological Trend in Aerospace 12 (1): 59–67. (in Korean). Byun, Wanil. 2014. Current Status and Forecast of Domestic Aircraft Industry. Current Industrial and Technological Trend in Aerospace 12 (1): 59–67. (in Korean).
go back to reference Cho, Myeong-Chin. 2003. Restructuring of Korea’s Defense Aerospace Industry: Challenges and Opportunities? Paper 28. Bonn International Center for Conversion. Cho, Myeong-Chin. 2003. Restructuring of Korea’s Defense Aerospace Industry: Challenges and Opportunities? Paper 28. Bonn International Center for Conversion.
go back to reference Cho, Tae Whan. 2000. Challenges in Research and Development for the Korean Aircraft Industry. In Emerging Threats, Force Structures, and the Role of Air Power in Korea, ed. Natalie W. Crawford and Ching-in Moon. Santa Monica: RAND Corporation. Cho, Tae Whan. 2000. Challenges in Research and Development for the Korean Aircraft Industry. In Emerging Threats, Force Structures, and the Role of Air Power in Korea, ed. Natalie W. Crawford and Ching-in Moon. Santa Monica: RAND Corporation.
go back to reference Choi, Woo-young. 2011. The History and Current Status of the Korean Aircraft Industry. Trends in the Aerospace Industry 9 (1): 20–29 (in Korean). Choi, Woo-young. 2011. The History and Current Status of the Korean Aircraft Industry. Trends in the Aerospace Industry 9 (1): 20–29 (in Korean).
go back to reference Choi, Young Jin, In Kyu Lee, and Kyung Tae Lee. 2010. Analysis of 2010-2019 Plan for the Korean Aerospace Industry Development. The Review of Aircraft Industry 72: 1–21. (in Korean). Choi, Young Jin, In Kyu Lee, and Kyung Tae Lee. 2010. Analysis of 2010-2019 Plan for the Korean Aerospace Industry Development. The Review of Aircraft Industry 72: 1–21. (in Korean).
go back to reference “Daewoo Heavy and Machinery To Sell KAI Shares.” 2004. Chosun Daily. August 5. “Daewoo Heavy and Machinery To Sell KAI Shares.” 2004. Chosun Daily. August 5.
go back to reference “Export of T-50 Soared as It Modified into Fighter.” 2012. Chosun Daily. April 12 (in Korean). “Export of T-50 Soared as It Modified into Fighter.” 2012. Chosun Daily. April 12 (in Korean).
go back to reference “Hanwha Techwin cancels KAI takeover.” 2016. The Korea Herald. January 6. “Hanwha Techwin cancels KAI takeover.” 2016. The Korea Herald. January 6.
go back to reference “KAI Produced 200 Units of T-50. 2015.” Korea Economic Daily. September 18 (in Korean). “KAI Produced 200 Units of T-50. 2015.” Korea Economic Daily. September 18 (in Korean).
go back to reference “KAI to Develop Military and Commercial Aircrafts Simultaneously.” 2015. Joongang Daily. June 26 (in Korean). “KAI to Develop Military and Commercial Aircrafts Simultaneously.” 2015. Joongang Daily. June 26 (in Korean).
go back to reference Kim, Doo Hwan. 2006. Korea’s Space Development Programme: Policy and Law. Space Policy 22 (1): 110–117. Kim, Doo Hwan. 2006. Korea’s Space Development Programme: Policy and Law. Space Policy 22 (1): 110–117.
go back to reference Kim, Ik Sang. 2014. Korea Aerospace Industry (KAI): Going beyond the Limitation of Domestic Manufacturers. Company Analysis. HRI Research Center. March 31 (in Korean). Kim, Ik Sang. 2014. Korea Aerospace Industry (KAI): Going beyond the Limitation of Domestic Manufacturers. Company Analysis. HRI Research Center. March 31 (in Korean).
go back to reference Korea Aerospace Industries Association. 2015. Korea Aerospace Industry 2015. Korea Aerospace Industries Association. Korea Aerospace Industries Association. 2015. Korea Aerospace Industry 2015. Korea Aerospace Industries Association.
go back to reference Korea Aerospace Industries Association. 2016. Korea Aerospace Industry 2016-2017. Korea Aerospace Industries Association. Korea Aerospace Industries Association. 2016. Korea Aerospace Industry 2016-2017. Korea Aerospace Industries Association.
go back to reference “Korea to Complete Development of the KF-X in Ten Years.” 2016. Joongang Daily. January 22 (in Korean). “Korea to Complete Development of the KF-X in Ten Years.” 2016. Joongang Daily. January 22 (in Korean).
go back to reference Kotra. 2016. Korea’s Leading Industries: Aerospace. KOTRA. Kotra. 2016. Korea’s Leading Industries: Aerospace. KOTRA.
go back to reference Kwaak, Jeyup S. 2015. “Korea Aerospace Industries preferred Bidder for New Fighter Jet: Deal is part of Korean Fighter Experimental project.” Wall Street Journal. March 30. Kwaak, Jeyup S. 2015. “Korea Aerospace Industries preferred Bidder for New Fighter Jet: Deal is part of Korean Fighter Experimental project.” Wall Street Journal. March 30.
go back to reference Lee, Sung Won. 1998. Restructuring of the Aerospace Industry. The National Economy, March: 113–116. Lee, Sung Won. 1998. Restructuring of the Aerospace Industry. The National Economy, March: 113–116.
go back to reference Ministry of Industry and Resources. 2002. Press Release. August 29 (in Korean). Ministry of Industry and Resources. 2002. Press Release. August 29 (in Korean).
go back to reference Nolan, Janne E. 1986. Military Industry in Taiwan and South Korea. London: Palgrave Macmillan.CrossRef Nolan, Janne E. 1986. Military Industry in Taiwan and South Korea. London: Palgrave Macmillan.CrossRef
go back to reference Parameswaran, P. 2015. “Philippines Receives 2 New Fighter Jets from South Korea.” The Diplomat. December 1. Parameswaran, P. 2015. “Philippines Receives 2 New Fighter Jets from South Korea.” The Diplomat. December 1.
go back to reference Park, Jiyoung. ed. 2014a. Space Technology Development: Effects on National Security and International Stability. Asan Report. Park, Jiyoung. ed. 2014a. Space Technology Development: Effects on National Security and International Stability. Asan Report.
go back to reference Park, Moo Hyun. 2014b. “The Growth of the KAI Will Continue for Ten Years.” Etrade. February 24 (in Korean). Park, Moo Hyun. 2014b. “The Growth of the KAI Will Continue for Ten Years.” Etrade. February 24 (in Korean).
go back to reference “Red Light Turned on the Privatization of the KAI.” 2016. Korean Economic Daily. January 11 (in Korean). “Red Light Turned on the Privatization of the KAI.” 2016. Korean Economic Daily. January 11 (in Korean).
go back to reference Shin, Jang-Sup, and Ha-Joon Chang. 2003. Restructuring Korea Inc. Oxford: RoutledgeCurzon.CrossRef Shin, Jang-Sup, and Ha-Joon Chang. 2003. Restructuring Korea Inc. Oxford: RoutledgeCurzon.CrossRef
go back to reference “Surge of T-50 Export wth the Modification into FA-50.” 2014. Premium Chosun. April 12. “Surge of T-50 Export wth the Modification into FA-50.” 2014. Premium Chosun. April 12.
go back to reference The KAI Delivered the First T-50. 2005. Hangyeoreh. December 29 (in Korean). The KAI Delivered the First T-50. 2005. Hangyeoreh. December 29 (in Korean).
go back to reference The KAI Signed a Contract for the KF-X. 2015. Global Defense News. December 29 (in Korean). The KAI Signed a Contract for the KF-X. 2015. Global Defense News. December 29 (in Korean).
go back to reference The KAI Will Produce 20 F-16 under License. 2000. Dong-A Daily. September 22 (in Korean). The KAI Will Produce 20 F-16 under License. 2000. Dong-A Daily. September 22 (in Korean).
go back to reference The Ministry of Knowledge Economy. 2010. Press Release: The Roadmap of the Korean Aircraft Industry’s Leap (in Korean). The Ministry of Knowledge Economy. 2010. Press Release: The Roadmap of the Korean Aircraft Industry’s Leap (in Korean).
go back to reference “The Ministry of Knowledge Economy that Calls for the Development of the Aircraft Industry, but Benefits the US Aircraft Companies.” 2011. Shin Dong-A. February 23 (in Korean). “The Ministry of Knowledge Economy that Calls for the Development of the Aircraft Industry, but Benefits the US Aircraft Companies.” 2011. Shin Dong-A. February 23 (in Korean).
go back to reference The Ministry of Knowledge Economy that Feeds the US Aerospace Companies, while claiming the development of the Aircraft Industry. 2010. Shin Donga-A. March. The Ministry of Knowledge Economy that Feeds the US Aerospace Companies, while claiming the development of the Aircraft Industry. 2010. Shin Donga-A. March.
go back to reference The Publishing Committee of the Sixty-Year of the Korean Economy. 2010. The Korean Economy: Six Decades of Growth and Development. Seoul: KDI (in Korean). The Publishing Committee of the Sixty-Year of the Korean Economy. 2010. The Korean Economy: Six Decades of Growth and Development. Seoul: KDI (in Korean).
go back to reference Um, Jungsik. 2016. Park Chung Hee Administration’s Fighter Experimental (F-X) Project and Carter Administration’s Arms Transfer Policy. The Korean Journal of International Studies 56 (1): 111–142. (in Korean). Um, Jungsik. 2016. Park Chung Hee Administration’s Fighter Experimental (F-X) Project and Carter Administration’s Arms Transfer Policy. The Korean Journal of International Studies 56 (1): 111–142. (in Korean).
go back to reference Yang, Yong-Seok. 2008. Policy Recommendations for International Joint Development of Civilian Aircrafts. Aviation Promotion 47: 177–200. (in Korean). Yang, Yong-Seok. 2008. Policy Recommendations for International Joint Development of Civilian Aircrafts. Aviation Promotion 47: 177–200. (in Korean).
go back to reference Yong, Paul. 2017. “Aircraft Leasing.” Asian Insights SparX-Aviation. February 10. Yong, Paul. 2017. “Aircraft Leasing.” Asian Insights SparX-Aviation. February 10.
Metadata
Title
Restructuring and Continuity in the Aircraft Industry
Authors
Seungjoo Lee
Sang-young Rhyu
Copyright Year
2019
DOI
https://doi.org/10.1007/978-3-319-71453-0_6