Tariffs are causing turbulence for Korean Air. But its CEO remains bullish

The chief executive of Korean Air, one of the world’s top airlines, has a stark warning about the impact of US President Donald Trump’s trade war on some of the carrier’s most popular routes. “We’re already seeing the downturn in passenger volume between trans-Pacific (routes) and also to Europe,” Walter Cho told CNN this week, just steps away from a gleaming Boeing 777 decked out in the airline’s distinctive blue and white colors. “It’s subtle, maybe 5% compared to last year, but it has some significant impact to our business.” When asked how the decline translates into dollars, Cho indicated it could cost Korean Air anywhere between $50 million to $100 million a year in lost revenue if lower passenger levels continue for the rest of 2025. “Korea’s economy is in between the US and China, and we depend on both economies as well, quite a bit,” Cho said. “We are bracing for the impact we’re looking at. I don’t expect this year to be great for the Korean economy, and we are looking at our costs as we speak. But I hope, I hope I’m wrong,” he added. Korean Air, which completed the acquisition of rival Asiana Airlines in December, isn’t the only major airline to warn about the impact of tariffs. Delta Air Lines said in April that revenue could fall in the current quarter and “growth has largely stalled.” Delta, American Airlines and Southwest Airlines have all stopped providing full-year financial forecasts due to the uncertainty. Still, Cho remains optimistic. He said he believes the trade war will end “soon” and that Korean Air will remain in the black. He partially attributed the slowdown in traffic along the European and Pacific routes to increased competition, as travel returns to pre-Covid levels. Adding US flights As US-based airlines from United to Southwest cut back on flight schedules, South Korea’s flagship carrier plans to maintain all its routes to America. Cho confirmed Korean Air will move forward with plans to reintroduce Airbus A380 flights from Seoul to Los Angeles in the summer, and Boeing 747 flights from Seoul to Atlanta. “I looked at the reservation data for the summer; it’s very strong,” he said. “Starting June, mid-June, everything is full, all the way up to the first week of September.” “There’s still demand for each route, and we cannot change our schedule just because traffic is down 5-10%,” Cho continued. “So, we’re going to have to hold on to them.” Trade war headwinds will be difficult for the industry to ignore, however. Advisory firm Tourism Economics projects under an expanded trade war scenario, international inbound visits to the US could decline by 12.7% this year, leading to a $22 billion annual loss in inbound travel spending. Outside the US, the International Air Transport Association (IATA) says global travel demand appears resilient. In an April interview with Reuters, IATA Director General Willie Walsh said that while trade-related uncertainty is never welcome, the aviation industry has historically managed such disruptions. Transatlantic travel rose in January and February compared to the same period last year, Walsh said, and overall global demand remains roughly 9% above pre-pandemic levels. “It’s not obvious that there’s been an impact,” Walsh said, noting data for March and April has not yet been received. But a tumultuous tariff environment could also spell trouble for cargo flights, which are a sizable portion of Korean Air’s business. During the Covid-19 pandemic, the carrier hollowed out passenger planes and reconfigured them into cargo freighters. The pivot to a business model focused on shipping and trade during the nadir of the pandemic-induced economic shock in 2020 helped save the airline, Cho said. For a vastly different tariff-related shock in 2025, Korean Air’s cargo operations may have to look for new markets. “It’s kind of tough, because about 40% of our business, Korean Air business, is in cargo, and that will get impacted severely when the tariff actually hits Korea and also China,” Cho said. “So, I’m not planning to downsize our cargo. We’re going to refocus our volume to Europe and other places where demand will still be. Also, I’ve been seeing a lot of trade between China and Canada, for example. We could focus on those markets as well,” he added. Korean Air is potentially vulnerable because South Korea manufactures a high volume of semiconductor chips bound for the US, according to Shukor Yusof, founder of Singapore-based Endau Analytics, an advisory firm that focuses on the aviation industry. Although the Trump administration has so far exempted semiconductors, smartphones, computer monitors and various electronic parts from tariffs, uncertainties linger. “They are feeling the heat,” Yusof said. Buying American In March, Korean Air finalized its biggest order from Boeing ever: up to 50 widebody airplanes, including 20 Boeing 777-9s and 20 Boeing 787-10 Dreamliners with options for 10 additional Dreamliners. The planes will be powered by GE Aerospace engines, a combined $32 billion deal hailed by the White House. “Yes, but you know, I was always a Boeing fan, so to speak,” Cho said. “There’s only two choices (the other being Airbus), I always trusted Boeing, and I always go to Boeing for my needs.” Cho said the decision to buy the Boeing planes was made last year, before Trump’s second term in office. He said his decision to sign off on the blockbuster agreement in Washington indicates strong ties between Korean Air and US manufacturing. Despite headlines in recent years highlighting problems at Boeing, from a blown-out 737 MAX 9 door plug over Portland, Oregon, to allegations of quality control issues, Cho said he will continue to trust the American aerospace giant well into the future. Elevating experiences Even at a potentially perilous time for the global economy, Cho said planned upgrades to all Korean Air cabins will not be paused. After the US greenlighted the airline’s long-anticipated merger with Asiana in December, Cho said a goal of the larger airline would be to catch up with the quality and luxury offered by global rivals such as Singapore Airlines and Qatar Airways. “We’re not cutting back,” Cho said. “I believe it’s a long-term investment. Once I gain the trust of the customer, they’ll come back.” Legroom in Korean Air’s relatively spacious economy seating will not be reduced. Upgrades to lounges at New York’s JFK, Seoul’s Incheon and Los Angeles’ LAX will not be put on hold, even as recession fears grow. “I felt that all passengers should have some comfort, even if they are flying economy,” Cho said. “So, we are maintaining our seat pitch, much bigger than the industry standard, and we’re introducing new catering for everybody, including new Korean cuisine and new entertainment system and Wi-Fi.” Within three to four years, Cho expects new seating and refurbished cabins to be installed across the entirety of Korean Air’s expanded, post-merger fleet. “We’re moving as fast as we can, but we have about 150 airplanes that we have to refurbish. And it takes a lot more than we expected due to supply chain issues.” Cho was candid about the turbulence ahead: a multibillion-dollar merger, an aggressive fleet overhaul and a global trade war that threatens to erode Korean Air’s revenue. “It’s a lot of money,” he acknowledged, reflecting on the airline’s most ambitious transformation in decades. “But it’s been 43 years since we changed. It’s about time.” At a moment when many global carriers are retrenching, Cho is making a calculated and consequential bet: that enduring ties with the US and sustained investments in the passenger experience will help Korean Air navigate a trade war storm, one with no clear end in sight.