Korean Air and IBM Announce Strategic Technology Partnership
Airline will completely restructure information technology operations; outsource IT to IBM, and create new customer services.
Seoul (September 15, 1998) – Korean Airlines and IBM today announced that they intend to create a strategic technology partnership, which is designed to completely refresh and restructure Korean Air’s information technology operations, outsource those IT operations to IBM, and enable the airline to give its customers unique new customer services.
A centerpiece of Korean Air’s plans with IBM will be a new global network, which will provide the basis for new services to Korean Air customers around the world. Korean Air will exploit IBM’s extensive research and experience in e-business solutions to build the network more quickly, so that they can help capture the exploding market growth of the Internet.
Under the agreement, IBM Global Services also will provide data center operations services and network services for Korean Air, assuming responsibility for:
Operation of all of the airline’s computer systems;
Service Center management;
Technical support services;
Network management;
Global network infrastructure;
Business recovery services.
IBM Global Services, the world’s largest provider of IT services and strategic outsourcing, said that it plans to create a major IT services center in Korea to meet the IT needs of Korean Air, as well as other Korean companies considering strategic outsourcing. This will be part of IBM’s extensive network of information technology geoplexes around the world.
The two companies have signed a binding letter of intent, with a contract scheduled to be signed by the end of 1998. Exact details, such as financial issues and details regarding the affected Korean Air employees, are still being finalized and were not announced today. However, the agreement is expected to be valued in excess of $400 million over a 10-year period.
Mr. Y. H. Cho, president of Korean Air, said that the airline intends to exploit leading-edge technology and the Internet to make Korean Air more competitive. “Korean Air will use IBM’s experience in managing large and complex data networks to improve our IT effectiveness and service levels,” said Mr. Cho. “Service quality is critical to our customers.”
“We believe Korean Air is the best airline in the world, but that reputation will not last if we cannot maintain leadership in new technology, which increases our customer loyalty and lowers our costs of doing business,” he continued. “We are not experts in technology, but we are experts in providing a first class airline service. That is why we are teaming with IBM to help us with the technology.”
Mr. Chae Chol Shin, president of IBM Korea, said that IBM would use its global experience, comprehensive services skills, and worldwide reach to maximize the effectiveness of Korea Air’s information technology. He said IBM is also committed to growing IBM Global Services business in Korea.
“As Korea’s major corporations restructure their businesses to allow more focus on their core businesses, IBM Korea will be offering comprehensive IT services to help organizations improve their effectiveness and exploit technology to compete globally,” he said. “This announcement, together with recent outsourcing contracts at Daiwa Bank in Japan and Cathay Pacific in Hong Kong, reflects the continued strong growth of IBM Global Services throughout Asia.”
Korean Air, which was established in 1962, is one of Asia’s largest passenger airlines and the world’s second largest cargo freighter. It operates 146 domestic flights per day to 16 cities in Korea. Internationally, it operates 359 flights per week to 74 cities. Korean Air’s fleet consists of 36 Airbus, 47 Boeing, and 30 other aircraft.
IBM provides a broad range of products, services and integrated solutions to all segments of the travel and transportation industry. IBM already is a major supplier of outsourcing services to airlines around the world, including Cathay Pacific, Varig, Air Canada, Air New Zealand and Ansett Australia. IBM Global Services, with 116,000 employees, has been growing rapidly as organizations increasing look to technology to increase efficiencies, manage costs, and improve their competitiveness.
Source: IBM