Fly the slightly less un­friendly skies of Air Ko­ryo

North Korea’s Air Ko­ryo is clean­ing up its act

Bloomberg Businessweek (Europe) - - CONTENTS - −Cle­ment Tan and Sam Kim −Adi Narayan and Rajhkumar K Shaaw

“I’m sick of all the same footage of march­ing, pic­tures of Kim”

Af­ter years of be­ing ranked by busi­ness travel site Sky­trax as the world’s worst air­line, North Korean na­tional car­rier Air Ko­ryo is un­der­go­ing a rev­o­lu­tion of sorts. New planes, in-flight en­ter­tain­ment op­tions, smart uni­forms for the cabin at­ten­dants, and even an up­graded busi­ness class are com­ing to the much-ma­ligned op­er­a­tion. It’s all part of supreme leader Kim Jong Un’s ef­fort to boost tourist num­bers 20-fold, to 2 mil­lion, by 2020 and sup­ple­ment the na­tion’s mea­ger for­eign ex­change.

That may mean ad­ven­tur­ous trav­el­ers—like those who boast they trekked to Mon­go­lia’s Ulaan­baatar back when they had to pack their own toi­let pa­per—should book tick­ets now, be­fore the thrill of fly­ing the world’s only one-star air­line van­ishes.

The main draw for many is to peek in­side the world’s most iso­lated coun­try. As Sin­ga­porean Mindy Tan put it af­ter a visit last year: “I’m sick of all the same footage of march­ing, pic­tures of Kim. I just had to wit­ness it for my­self.”

For those not put off by the odd nu­clear test, mis­sile launch, or party purge, there are op­tions aplenty. Where else can you run a marathon down the same Py­ongyang streets fre­quented by young girls with replica grenades hang­ing from their belts

or watch 100,000 kids do a syn­chro­nized dance? North Korea wants to even­tu­ally open at­trac­tions such as the Masikry­ong ski re­sort and Lake Taesong golf club. Nei­ther Colorado’s Aspen nor Scot­land’s St. An­drews needs to worry yet.

It’s been said that the real draw of travel is the jour­ney rather than the desti­na­tion, and for that Air Ko­ryo doesn’t dis­ap­point. The video screens that drop down from the ceil­ings of its planes en­ter­tain guests with pro­pa­ganda broad­casts and con­certs by supreme leader Kim’s fa­vorite all-fe­male band, Mo­ran­bong, which sings pa­tri­otic songs about, well, him. Bring noise-can­cel­ing head­phones. It’s a com­mu­nal ex­pe­ri­ence, and there’s no vol­ume con­trol.

Air Ko­ryo re­cently ac­quired two Rus­sian-built Tupolev Tu-204s for in­ter­na­tional routes, with an econ­omy ticket cost­ing about 900 yuan ($138) for the two-hour jour­ney from Bei­jing. But U.K.based Juche Travel Ser­vices is of­fer­ing an avi­a­tion-themed tour of North Korea from May 9-13 for those who want to fly on the older Soviet-era air­craft the air­line is fa­mous for. Choices in­clude buzzing across the pic­turesque My­ohyangsan re­gion on a Mil Mi-17 trans­port he­li­copter and a ride on the last pas­sen­ger Ilyushin IL-18 still in sched­uled ser­vice. “It’s a very dif­fer­ent ex­pe­ri­ence, trav­el­ing back 20, 30 years,” says Sam Chui, an avi­a­tion en­thu­si­ast who’s flown Air Ko­ryo about 20 times.

Fliers may en­dure long check-in lines and im­mi­gra­tion has­sles on their way to North Korea, but things should be co­pacetic af­ter ar­rival in the Demo­cratic Peo­ple’s Re­pub­lic. No longer do tourists have to shuf­fle through the tem­po­rary shed that mas­quer­aded as an air­port ter­mi­nal for the past five years. The cap­i­tal has a sleek new build­ing. With fewer than a half-dozen in­ter­na­tional flights a day, the air­port bus may de­liver pas­sen­gers on time to the al­most de­serted build­ing.

The food, es­pe­cially in the new busi­ness-class lounge, has im­proved, but the most-pho­tographed part of any Air Ko­ryo trip re­mains the in-flight meal. “The burger has been go­ing on for so many years, ev­ery­one’s mak­ing fun of it,” says Chui, who’s eaten at least 10. When con­tacted for de­tails about the co­mestible, rep­re­sen­ta­tives at Air Ko­ryo’s Bei­jing of­fice didn’t re­spond.

The bot­tom line Air Ko­ryo is up­grad­ing its ser­vice as part of North Korea’s plan to in­crease tourist ar­rivals 20-fold. It may be too ag­gres­sive a tar­get.

re­spond to e-mails seek­ing com­ment.

With out­lets mostly con­cen­trated near Mum­bai, D-Mart squeezes more rev­enue from its stores than com­peti­tors—an es­ti­mated 24,000 ru­pees of sales per square foot, vs. 9,200 ru­pees at Fu­ture and 14,100 at Re­liance. “Other big re­tail­ers, they start hir­ing from the top, set up the head of­fice, ware­houses, and then even­tu­ally hire for the store. That kills it,” Noronha says. “When you start build­ing from the top, the cost will be too high.”

In­dia re­quires mak­ers of pack­aged goods to set a max­i­mum retail price, or MRP, for ev­ery item. Sell­ing prod­ucts— whether bath soap or cook­ing oil— for more than this pub­lished price is il­le­gal. The statute is meant to pro­tect con­sumers from wan­ton prof­i­teer­ing, but it also makes it “in­cred­i­bly dif­fi­cult” to prof­itably run a retail busi­ness, says Ashok Deena­day­alu, a con­sul­tant at Mithras Retail Ser­vices. That’s be­cause chains can’t charge more based on where items are sold—even when real es­tate or dis­tri­bu­tion costs are higher.

D-Mart’s draw for con­sumers is its prom­ise to sell goods below this price, some by as much as 12 per­cent; it sells gro­ceries plus a wide as­sort­ment of cheap house­hold items— school bags, cook­ing uten­sils, and the like—akin to a dol­lar store. “If you give cheap prices on ba­sic and com­mon prod­ucts, the per­cep­tion gets built that ev­ery­thing in the store is cheap,” Deena­day­alu says. “Cus­tomers come for the food but also buy a whole lot of other goods that have high mar­gins.”

Growth will come from new stores and trim­ming costs, but mar­gins are un­likely to in­crease much, Noronha says. “When you are in the busi­ness of value retail, it’s stupid to ex­pect any­thing more,” says the for­mer Unilever man­ager. “In a de­vel­oped coun­try, you can get away with mak­ing 30 and 40 per­cent gross mar­gins. Not here.”

The bot­tom line For­eign re­tail­ers have had a tough time in In­dia. A lo­cal, D-Mart, uses su­percheap prices to win busi­ness.

Air Ko­ryo


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