Korea Airports Corporation _ 2006 Annual Report

KOREA AIRPORTS CORPORATION!

In 2006, even though all airports in Korea had to face rapid changes and challenges, KAC has accomplished a higher corporate value through improving profitability and restructuring its financial status. We have created a strong foundation for going concern by preparing mid and long-term management strategies and by declaring the Vision 2010 to be an internationally recognized organization specializing in airport management that provides impressive customer services and fulfills its social responsibilities. In addition, we have transformed into a strategy performance oriented organization to accomplish the vision. We are now equipped with innovation system at all times, and the site management system and management ethics system have also been settled in.

contents
00_ 02_ 03_ 05_ 06_ 10_ 12_ 14_ 15_ 18_ 20_ 22_ 24_ 26_ 28_ 29_ 32_ 37_ 42_ PROFILE FINANCIAL HIGHLIGHTS 2006 AIR TRAFFIC AT MAJOR AIRPORTS BOARD OF DIRECTORS MESSAGE FROM CHIEF EXECUTIVE OFFICER INTRODUCTION OF KOREA AIRPORTS CORPORATION HISTORY ORGANIZATION AND REGULAR EMPLOYEES KAC VISION 2010 SAFETY MANAGEMENT SYSTEM AND SECURITY CUSTOMER SATISFACTION STRENGTHENING AIRPORT MARKETING STRENGTHENING THE ABILITY OF MANAGEMENT INNOVATION OPEN AIRPORT WITH OUR COMMUNITY AIRPORTS CONSTRUCTION DEVELOPMENT OF GIMPO INTERNATIONAL AIRPORT SURROUNDING AREA AIR TRAFFIC STATISTICS FINANCIAL STATEMENTS EPILOGUE

( FINANCIAL HIGHLIGHTS )

(In thousands of U.S. dollar)

2006

2005

2004

Status of finance Assets Liabilities Capital Status of Profit and Loss Operating revenue Operating expenses Gross profit from operation General and administrative expenses Operating profit Non-operating revenue Non-operating expenses Net income Major financial rate(%) Current ratio Debt ratio Operating income rate Sales growth rate

2,563,554 117,658 2,445,896

2,513,955 110,375 2,403,580

2,162,112 110,311 2,051,801

337,571 294,412 43,158 40,029 3,129 42,980 4,003 43,330

315,237 275,773 39,464 27,131 12,333 33,172 5,177 40,328

303,815 249,189 54,626 23,974 30,652 24,559 1,697 53,513

441.6 4.8 0.9 7.1

409.9 4.6 3.9 3.8

387.3 5.4 10.1 40.4

* We reported the amounts in US Dollar for your convenience. ($1 = 929.60 as of Dec. 31, 2006)

OPERATING REVENUE
(In millions of U.S. dollar)

303.8

315.2

337.5

NET INCOME
(In millions of U.S. dollar)

53.5 40.3 43.3

2004

2005

2006

2004

2005

2006

Korea Airports Corporation _ 2006 Annual Report 04 02

03

( 2006 AIR TRAFFIC AT MAJOR AIRPORTS )

GIMPO INTERNATIONAL AIRPORT

14.8 13.4

(Million persons)

13.8 - 13.76 million passengers - Domestic : 12.34 million passengers - International : 1.42 million passengers - Increase of 2.4% compared to last year 2004 2005 2006

GIMHAE INTERNATIONAL AIRPORT

7.7

(Million persons)

7.1 - 7.07million passengers - Domestic : 4.76million passengers - International : 2.31million passengers - increase of 0.4% compared to last year 2004 2005 2006 7.0

JEJU INTERNATIONAL AIRPORT

(Million persons)

12.1 - 12.11million passengers - Domestic : 11.21million passengers - International : 0.90million passengers - Increase of 6.6% compared to last year 2004 2005 2006 11.4 11.1

DAEGU INTERNATIONAL AIRPORT

1.6 - 1.19million passengers - Domestic : 0.90million passengers - International : 0.29million passengers - Decrease of 3.4% compared to last year 2004 2005 1.2

(Million persons)

1.2

2006

( 2006 AIR TRAFFIC AT MAJOR AIRPORTS )

GWANGJU INTERNATIONAL AIRPORT

1.9 1.6 - 1.63million passengers - Domestic : 1.5million passengers - International : 0.12million passengers - Decrease of 0.8% compared to last year 2004 2005

(Million persons)

1.6

2006

CHEONGJU INTERNATIONAL AIRPORT

0.8 - 1 million passengers - Domestic : 0.87million passengers - International : 0.13million passengers - Increase of 16.6% compared to last year 2004 2005 0.9

(Million persons)

1.0

2006

YANGYANG INTERNATIONAL AIRPORT

(Million persons)

0.1 0.06 0.05

- 50 thousand passengers - Domestic : 47 thousand passengers - International : 4 thousand passengers - Decrease of 15.1% compared to last year 2004 2005

2006

Korea Airports Corporation _ 2006 Annual Report 04

05

Board of Directors

Geun-Pyo Lee Hyung-Woo Kwon Si-Chul Sung Hee-Sun Kim Yong-Bin Ham Sung-Chang Wui Choong-Gie Kim

President & CEO Auditor Executive Vice President

Vice President of Strategic Planning Division Vice President of Corporate Management Division Vice President of Airside Operations & Safety Division Chief Executive Officer of Gimpo International Airport Office

Message From Chief Executive Officer

I would like to express my great appreciation to all of you for continuous encouragement and support.

The year 2006 was a very meaningful year to KAC. We prepared the foundation for all employees and executives to work towards a common target with consolidated mind as we established our vision that we will become an globally recognized organization specializing in airport management and operation by 2010. As well, we have completed the draft to become the best airport operating organization through corporate reorganization.

All of our 1,900 employees and executives at KAC have achieved a lot of great outcomes by challenging spirit with no fear for failure and passion for our individual duties.

First of all, KAC expended its operation of the Safety Management System that meets the requirement of international standards to airports all over the country. This expansion enhanced KACs safety management to the highest level by recognizing and removing potential risk factors in advance. As a result, KAC was able to accomplish the target of 5.7 million hours with no accident in navigational safety facilities, and significantly reduced the flight cancellation rate.

Secondly in terms of the service area, as a result of strengthening the on-site management activities, we continued to maintain the public corporation customer satisfaction index at the first level by remarkably improving the public credibility on quality of service. Especially for Gimpo International Airport, we have accomplished a great achievement of obtaining an upward We prepared the foundation for all employees and executives to work towards a common target with consolidated mind as we established our vision that we will become an globally recognized organization specializing in airport management and operation by 2010. Third one is regarding profitability and result of air transportation. Despite of the decreased demands for domestic flight due to KTX, KAC recorded the net income of 4.3 billion won through creating international flight grade of AA+ in service quality level.

Korea Airports Corporation _ 2006 Annual Report 06

07

demands, increasing non-aeronautical revenue, developing profitability of accompanying business, and putting a lot of effort on cost reduction. I am very proud to say that we have achieved surpluses for three consecutive years since 2004 and our operating revenue has been constantly increased. This is a result of our active marketing to minimize breakaway of domestic demands and to expand international flights. The domestic passengers in 2006 were decreased by 0.1% showing a very small decrease compared to 2005, while passengers on international flights were enormously increased by 22.8%

the requirements of international safety management system.

Second, we will sustain the best grade in public corporation customer satisfaction index and will acquire the certification of airport service quality management (ISO9001) for regional airports such as Gwangju and Yangyang International Airports.

Third, we will increase the profit by revitalizing regional airports through raising air demands and creating new profitable resources as we did last year.

These results from last year are only the beginning. We will not be fully satisfied with achievements from last year. But instead, we will continue putting as much effort as possible to achieve the 20 management strategy projects established last year and the 109 management innovation projects established early this year as we renew our attitude and will. We will be trying our best again this year to come closer to achieve our vision to be an globally recognized organization specializing in airport operation. It was possible for KAC to achieve such great results last year because of the profuse supports from our customers and related parties. All of us at KAC will never fear the The business environment in 2007 is expected to stay difficult. failure, and with this challenge spirits and innovative minds, we will stand as the worlds best airport operator in 2007. Finally, we will carry out the planned expansion projects at Jeju, Ulsan and Yeosu Airports perfectly. Forth, we will cultivate future oriented professionals, and raise the integrity and transparency of our corporate image.

However, KAC will make a strong predisposition to grow under any difficulties, based on our past experience and continuous management innovation.

At this time, I cordially solicit your unswerving concerns and continued encouragement and wish you endless happiness and healthy.

Our management principal this year is customer oriented value management. To follow this principal, we will strive to work harder to accomplish the 5 business targets of recognizing the importance of safety, customer orientation, increasing profitability, promotion of innovation, and performing construction projects.

Geun-Pyo Lee
President & CEO Korea Airports Corporation

First of all, we will maintain the best safety system by operating the taking off/landing facilities and navigation safety system non-stop and upgrading the airports to meet

07:30 a.m.

313,805

KAC Operating Revenues

MILLION WON

09:55 a.m.

Delivering dreams
KAC manages and operates total of 14 airports in Korea including Gimpo, Gimhae, Jeju, Daegu, Gwangju, Cheongju, and Yangyang International Airport. KAC also manages the Air Route Traffic Control Center, 8 VOR/TACs and the Civil Aviation Training Center.

( INTRODUCTION OF KOREA AIRPORTS CORPORATION )

Introduction of Korea Airports Corporation

project, KAC has built shopping and leisure town, medical facilities, and cultural places that combine environmentally friendly cultural space and commercial facilities together to transform Gimpo International Airport into an airport of new concept.

Korea Airports Corporation was established in 1980 to promote the efficient construction, operation of airports and the smoothness of air transportation. As an airport management specializing organization, KAC manages and operates total of 14 airports in Korea including Gimpo, Gimhae, Jeju, Daegu, Gwangju, Cheongju, and Yangyang International Airport. KAC also manages the Air Route Traffic Control Center, 8 VOR/TACs and the Civil Aviation Training Center.

Also KAC is currently operation Gimpo-Haneda route, which offers the fastest air way from Seoul to Tokyo. As well, With the accumulated managerial know-hows and constant research and development, KAC is leading the aviation IT

Under the Vision2010, which is an internationally recognized organization specializing in airport management that provides impressive customer services and fulfills its social responsibilities, highly committed to value and develop aviation safety and customers satisfaction, KAC will continue to provide the pride to the employees; the impression to the public; the trust to the customers with new standards of managerial and operational excellence in building public confidence.

through developing its own IT products such as DVOR, FIS (Flight Information System), and RFID (Radio Frequency Identification).

KAC is planning to focus on investing in improvement of the foremost safety and customer service to fulfill the basic duties of KAC. As well, with the know-hows gained from 26 years of airport management and operation, KAC will strive to work harder to establish the honor as a globally recognized organization specializing in airport operation and

Following the trend of worlds airport management, KAC has been proceeding with a project called SkyCity. Under SkyCity

management.

Korea Airports Corporation was established in 1980 to promote the efficient construction, operation of airports and the smoothness of air transportation.

Korea Airports Corporation _ 2006 Annual Report 10

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INTERNATIONAL AIRPORT(7)

DOMESTIC AIRPORT(7)

GIMPO

GIMHAE

JEJU

DAEGU

GWANGJU

CHEONGJU

YANGYANG

AIRPORTS UNDER KAC

ULSAN

YEOSU

MOKPO

SACHEON

POHANG

GUNSAN

WONJU

Mission statement

Scope of Business
- Management and Operation of 14 airports in Korea including Gimpo International Airports (7 International Airports, 7 Domestic Airports) - Management and Operation of Air Routes Traffic Control Center and 9 VOR/TACs - Operation of Korea Civil Aviation Academy for cultivating aviation specialist - Carrying out projects such as construction, expansion and maintenance of airports

As efficiently construct and operate the airports - For promoting airport transportation - Contribution to national economic development and promotion of public well-being

( HISTORY )
KAC manages and operates total of 14 airports in Korea including Gimpo, Gimhae, Jeju, Daegu, Gwangju, Cheongju, and Yangyang International Airport. KAC also manages the Air Route Traffic Control Center, 8 VOR/TACs and the Civil Aviation Training Center.

1980 ~ 1989
1980. 05. 30 International Airport Authority founded 1980. 07. 01 Operational control of Gimpo International Airport acquired 1983. 05. 09 Operational control of Gimhae International Airport (Busan branch) acquired 1984. 06. 01 Civil Aviation Training Center established 1985. 09. 06 Operational control of Jeju International Airport (Jeju branch) acquired

1990 ~ 2000
1990. 04. 07 Renamed to Korea International Airport Authority 1990. 06. 28 Operational control of 9 domestic airports including Daegu Airport acquired 1991. 12. 14 Renamed to Korea Airports Authority 1994. 12. 13 Operational control of air route traffic facilities acquired (Air Route Traffic Control Center established ) 1997. 01. 15 Operational control of Cheongju and Wonju airports acquired (Cuenogju Wonju branch) 1999. 01. 15 Operational control of 8 VOR/TACs (including Anyang VOR/TAC) acquired

Korea Airports Corporation _ 2006 Annual Report 12

13

2001 ~ 2004
2002. 03. 02 Renamed to Korea Airports Corporation 2002. 04. 03 Operational control of Yangyang International airport acquired (Yangyang branch) 2003. 11. 30 International operations between Gimpo and Haneda started 2004. 08. 30 Acquirement of ISO 9001 Service Quality System Certificate

2005 ~ 2006
2005. 12. 21 Service & Security Training Center established 2005. 12. 29 Placing 3rd on Public Corporation National Customer Satisfaction Index 2006. 06. 05 Conclusion Agreement to develop the Theme Park in Gimpo international airport

( ORGANIZATION AND REGULAR EMPLOYEES )

ORGANIZATION - 3divisions 30teams(centerdepartments), Air Routes Traffic Control Center, Korea Civil Aviation

Academy, 14 branches
Planning & Management Team Innovation Strategy Team Investment Planning Team Organization & Legal Affairs Team Management Evaluation Team Management Information System(MIS)&IT Team Public Relations Team Marketing Team(8 Teams)

BOARD OF DIRECTORS

Strategic Planning Division

PRESIDENT & CEO

Research & Development Center Secretariat Team

Corporate Management Division

Human Resources & General Administration Team Career Development Team Labor Relations & Welfare Team Finance&Accounting Team

AUDITOR

Property Management Team Outsourcing Management Team

Audit & Inspection Department

Service Development Team (7 Teams) Airside Planning & Operations Team Security Planning Team Airport Facilities Planning & Development Team Civil Engineering & Construction Project Team Technical Engineering Project Team Airport Facilities Management Team NAVAIDS Team (7 Teams) 14 branches (regional offices) (including 3 regional divisions) Air Routes Traffic Control Center (ATCC) Korea Civil Aviation Academy

Airside Operations&Safety Division EXECUTIVE VICE PRESIDENT

Safety & Environment Team Business Development Team Contingency Planning Team

* 14 branches : Seoul, Busan, Jeju, Daegu, Cheongju, Yangyang, Gwangju, Ulsan, Yeosu, Mokpo, Sacheon, Pohang, Gunsan, Wonju * 9 VOR/TACAN site : Busan, Jeju, Daegu, Pohang, Yecheon, Gangwon, Anyang, Yangju, Buan

THE FIXED NUMBER OF EMPLOYEES : 1,913 EMPLOYEES - Head office : 238 employees (including 6 executives) - branches : 1,675 employees (including 1 executive, 541 security guards )

Korea Airports Corporation _ 2006 Annual Report 14

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( KAC VISION 2010 )

Impressive customer service

The amount of donation for community contribution to more than 2% against the operation revenue Contribution to national development and promotion of public well-being Maintenance of top layer in integrity and ethic management Top of Public Corporation Customer Satisfaction Index Non-stop airport operation

ZERO security accident

Fulfilment of its social responsibilities

The completion of futuristic technology and management system Acquisition of airport operation certificate in all airports

KAC VISION 2010

Specialized corporation in airport management

Resources of airport operational technology Achievement of operating revenue 450,000million won and ROA 7% Building ability of entrusting administration and overseas expansion Top 10% within Public Corporation Management Rating System

Building of SMS in all airports

Global Standard

Vision
Globally recognized organization specializing in airport management that provides impressive customer services and fulfills its social responsibilities

Core value
Consideration of safety and security, customer oriented, increasing revenue, activating innovation

Target area for achieved vision Business strategies

Customer oriented value management Impressive customer service, fulfillment of its social responsibilities, global standing, specialized corporation in airport management

12:30 p.m.

Delivering Solution
KAC met the certain level of safety expectation of customers and achieved the goal of ZERO accident. So we could establish the safety management system to be a specializing organization in airport management.

15:40 p.m.

39.5

KAC handled

MILLION PERSONS

( SAFETY MANAGEMENT SYSTEM AND SECURITY )

Expansion of international safety management system to regional airports in Korea

committee and review. Especially, we achieved more advanced risk management process than other international airport as the first company in Korea to establish the database on airport risk management in December 2006.

KAC met the certain level of safety expectation of customers and achieved the goal of ZERO accident. So we could established the safety management system to be a specializing organization in airport management.

Improvement on taking off and landing facility and air navigational safety facility

Following the establishment of the safety management system in 7 international airports including Gimpo International Airport in 2005, KAC expanded the system to 6 regional airports Ulsan airport in 2006. This expansion helped KAC provides the safest airports. For carrying out effective safety management, we organized the safety committee with Chairman & President of KAC as the head and are continue to do safety activities through active supporting on the workforce and budget. As well, we consider that airport safety is the best value and goal of KAC and are putting our own effort for smooth communication and sharing the information as much as possible between the executives and the employees based on active participation and cooperation from all airport resident agencies and companies such as airport operator, governmental agency, airlines, and ground handling company.

To accomplish non-stop operation of all airports for 365days, we are operating a Air Navigation Management Center using by high technology and equipment, and we are establishing the next generation global navigation satellite system.

Also, it is expected that Korea and Japan will be able to exchange more accurate information by building the Automatic Identification and Data Capture (AIDC) system between Incheon and Fukuoka ACCs.

KAC has been promoting the upgrade of the operation level to raise the rate of aircraft operation. So we will upgrade the operational level at Gimpo International Airport from CAT to CAT a to lower the possible lowest landing visibility from 350m to 200m from June 7, 2007.

KAC will also upgrade the operational level at Jeju The main contents of safety management system are that voluntary finding and reporting the risk, which can happen in the airport and interest of the executives. we are carrying out the secretive report system for voluntary report on risk. Also, the executives are actively participating through safety International Airport from CAT to CAT so that the planes can land with visibility of 350m instead of 550m to reduce the rate of flight cancelation and delay.

Korea Airports Corporation _ 2006 Annual Report 18

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Establishment of international Aviation Security System

detector) regarding the material resource. Expecially, KAC introduced 2 portable X-ray at Gimpo International Airport so that we could ensure the capable of speed X-ray inspection by moving X-ray to site such as apron when the problems are occurred.

KAC established the aviation security system, which meets the requirement of international standard based on ICAO Annex 17. The system was confirmed by receiving great from aviation security appraisal by ICAO in 2006 (06.11.15~11.17) and by Transportation Security Administration (06.6.26~6.30)
Aviation Security Expert

Strengthening entrance control of airport safety zone

To enter the safety zone, persons identity was confirmed by pass and fingerprint verification system, which was newly introduced and operated in 11 airports(total of 61 systems). As well, we renew the pass every 2 years. In addition, we strengthened the entrance control of airport safety zone though installing and operating X-ray and metal detector(door shape) at the 4 entrances of Gimo International Airport safety zone and road block to prevent any unauthorized vehicles In addition, we will cultivate 2 ICAO Certified Aviation Security Instructors and 1,672 of security inspectors and guards took the special training. Also, 54 staffs who handle the explosive took the special training in outside education center such as Korean Chemical Biological Nuclear Safety Agency. As for, KAC put its effort to cultivate the professional employees.
Achievement of aviation security quality control

We made an effort to have professional employee to keep the international level of aviation security. So we could newly have a ICAO Certified Aviation Security Auditor who has qualification to participate in international aviation security appraisal holding by ICAO as an appraiser in May 5, 2006.

KAC will expand its installations of the more advanced defense facilities at Gimpo International Airport and Yeosu Airport to establish systematic and effective electronic defense system. Also, we will introduce 22 X-rays and 41 metal detectors(door shpae) to install in new passenger terminal at Gimhae International Airport and Muan airport(new) until October 2007. We will introduce 7 liquid explosive detectors until July 2007 to strengthen the security inspection on liquids regrading the prohibition of carrying out liquids on the cabin for all international flights from March 1, 2007 based on ICAO recommendation.

For continuous quality control, we introduced the security inspection mileage system and provided the incentives(award, overseas training) to inspection staff regarding the human resource and achieved the modernization of security equipments(new 44 equipments including X-ray, explosive

( CUSTOMER SATISFACTION )

Effort for customer satisfaction

In addition, KAC has been realizing the customer satisfaction oriented management by reflecting a number of customer suggestions received through various customer participation channels such as customer council, airport operation council, movement area meeting, joint marketing meeting for commercial facilities, and tenants meeting in its operations.

KAC declared the Vision 2010 of offering services to impress customers, and worked towards building customer satisfaction oriented management system in 2006. KAC established CS teams to professionally focus on customer satisfaction not only in the headquarters but also in other major regional offices such as Seoul, Busan, and Jeju. Independently from CS teams, KAC also operated the CS innovation team to be in charge of CS Innovation.

For excellent improvement on security inspection service, which was considered as one of inconvenience matter when using the airport, we carried out the A-pass system so that

To ensure the manpower to lead the customer impression, we cultivated CS innovation specialists such as CS leader, CS sponsor, CS instructor, and internal auditor. As well, we offered service trainings for total of 5,700 people including KAC employees, staffs from the resident agencies and stores in the airport, and employees from the collaborative company.

we could solve the rejection of security inspection and reducing the inspection time by providing speed, exact and kind inspection service.

In 2006, KAC confirmed its status as externally recognized national organization by obtaining Korea Best Certificate from Korea Customer Satisfaction Management Award by

KAC is deriving CS innovation by objectively appraising the achievement on customer satisfaction through customer satisfaction survey, service monitoring, competitions and reward programs for the best CS employees and by relating the results from the appraisals to the compensation system.

Korea Management Association and Best grade in Public Corporation Customer Satisfaction Index by Korea Productivity Center for two consecutive years as a result of the managements efforts in site and customer oriented management, and by expending ISO 9001 quality management.

Korea Airports Corporation _ 2006 Annual Report 20

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Realization of u-airport

opportunity to have direct experience and to take picture with robot for many passengers. As well, we will introduce and install CUSS KIOSK and Common Check in system to reduce the waiting time and to handle the passenger quickly in new passenger terminal, which will be open in November 2007 at Gimhe International Airport. In addition. we will establish RFID system at domestic airports and on Gimpo-Hanead international route until this November so that we will plan to prevent the loss of baggage, to check loading, to manage the risk/ownerless baggage, and to provide the arrival alarm service. Moreover, we are promoting the resource of RFID

To build advanced airports based on ubiquitous technology where you can use information regardless of place and time as the U-Society is coming in the near future, we have established a master plan to construct U-Airports in October 2006. 13 tasks in 5 fields such as providing new passenger service by simplifying the passenger process, mobile, and strengthening security and safety using by IT were chosen to create more advanced airport where passenger service and safety are reinforced with the investment of 34.5billion won by 2010.

In 2006, KAC provided the airport information service by ubiquitous robot. As a unique item at the airport, it was contribution on improving passenger services by providing the

know-how accumulated since 2004 by getting a special license.

( STRENGTHENING AIRPORT MARKETING )

Strengthening marketing activities to keep the domestic flight demand

by airlines in 2007, we will keep the air routes through improving connecting routes with public transportation, expanding transportation network, and supporting promotion of low cost airlines.
Effort on Expanding International Flights

KAC offered airlines a 50% discount on airport facility fees at Pohang, Mokpo, Yangyng, and Yeosu airports, and reduced rental at Yangynag airport. As well, we are exempting airport users from paying parking fees at Yangyang, Mokpo airports. We opened VIP rooms, installed business rooms, and enforced a discount program for air passengers. By strengthening the joint marketing as above, we made a great achievement of having only 0.1% decrease in domestic passengers despite of the significant decrease in the number of existing flights in 2006.

The number of international passengers was increased by 22.8% to record 5,186,000 and the number of international aircraft movement was increased by 22.2% to record 35,768 compared to year 2005. Further, we achieved an increase of 8.7 billion won in aviation revenue. Gimhae-Munich route by Lufthansa was established for the first time at a regional airport. We are also encouraging the regional governments to

In addition, to promote transportation at regional airports, we have actively supported low cost airlines that have competitive advantages on airfares and traveling time over land transportations, through providing operational support facilities and reducing airport facility charges. With such promotion programs, low cost airlines transported 758 thousand passengers on 5 routes, sharing 5.7% of operational market and 2.2% of total passengers. Although it is expected to decrease by about 3% due to the reduced number of flights

offer incentives to travel agencies for attracting customers, and to provide financial supports to subsidize deficiencies of airlines, to expand international routes. In 2007, we will actively attract Southeast Asian and Chinese routes as a means of promoting international flights. Most of all, we will strengthen our effort to attract the airlines on open sky areas and will put our every effort to prepare for opening the shuttle routes between Gimpo International Airport and Hongqiao International Airport(Shanghai).

To vault into a customer satisfaction oriented organization, KAC conducted systematic and institutional policies for continuous improvement.

Korea Airports Corporation _ 2006 Annual Report 22

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Active Exchange with International

The route also recorded more than 70% boarding rate for 3 consecutive years and settled as specialized route for businessmen. On the other hand, we made a tremendous achievement in the agreement on new flight to connect Gimpo International Airport and Hongqiao International Airport(Shanhai) at the summit meeting between Korea and China as a result of our active marketing.

Organization and Foreign Airports

We promoted active exchange with foreign airports by holding an EAAA conference and a sister airport annual meeting (Haneda, Beijing, Kitakyushu), and participating in World Route Development Forum. Also, we established the foundation of international route marketing to establish the network with aviation industry officials and to expand air routes by strengthening the cooperation with ACI and ICAO.

Specializing Gimpo International Airport for high quality of short-haul route targeting businessman and VIP customers.

We expanded the operation time (06:00 ~ 23:00) to attract more international private jets. Moreover, we were able to achieve operation increase of 116% compared to year 2005 through installing and providing exclusive parking lots and operational support room. We have also newly attracted a route to North Korea in May 2006. In 2006, Gimpo-Haneda shuttle route carried 1.42 million passengers to rank 3rd highest passenger transportation rate and the highest mail transportation rate among all international routes in Korea.

( STRENGTHENING THE ABILITY OF MANAGEMENT INNOVATION )

Establishment of management strategy of mid and long term

hierarchical systems. The main point of this corporate reorganization was introducing a complete team system. We have abolished 13 team business unit by conducting the merger and abolition of big scale business unit and made 3 divisions, 1 department, 1 center, 16big scale business unit and 16branches and 93 teams, and empowered head of team to control each section. In addition, we have ensured the competitiveness and responsibility, and established the system of outcome oriented organization through simplifying the decision-making process.

KAC has actively responded to rapidly changing business environment within and outside of the country. KAC has also established a detailed action plan including 10 agendas such as strengthening community contribution activity and 20 core strategic subjects such as development of new technology for strategies to achieve long term management targets and future vision(Vision 2010) for KACs new success and transformation into a strategy performance oriented organization with competitiveness.

Furthermore, we have adjusted the organizations previous KAC has established and declared Vision 2010 to become an internationally recognized organization specializing in airport management that provides impressive customer services and fulfills its social responsibilities. We have also set up the detailed performing objectives including non-stop airport operation, sustenance of the top levels in public corporation customer satisfaction index, integrity and moral management, to accomplish the Vision 2010 in terms of impressive customer service, fulfillment of its social responsibilities, global standards, and as a corporation specializing in airport management.
Reorganization Driving forward for management innovation

characteristics of provider oriented to customer oriented. As well, research and development center was introduced to enhance the potential future growth and to create higher corporate value.

KAC will go forward corporate innovation constantly through crevation109 that is community of practice. Crevation109 are filling the role of finding innovation tasks and solving the problem and construction innovation culture of corporation. To promote the management of continuous changes, we supported activities of change agent workshops and community of practice as we did last year. At the same time, we have also set up and carried out an innovation appraisal plan to diagnose and maintain the level of innovation. Moreover, while we re-built the education system for cultivating the job specialists and leaders, we developed and

We have been improved as a horizontal and flexible organization by strengthening strategic task functions through reorganization to segregate the duties between management and practical operations, and by simplifying the

Korea Airports Corporation _ 2006 Annual Report 24

25

promoted education system such as career development program for all employees.

how and skills, KAC has been developing the navigation aid systems.

In addition, KAC settled the performance oriented corporate culture through establishing the balanced score card to strengthen differentiated compensation scheme according to the task results. As well, we completed building Enterprise Resource Planning that will maximize the productivity and manage overall system through transparency of management information, support for speed decisionmaking, integration of diffused computing tasks for each part, and share of management information.

We participated in and publicized for 4 international conferences about DVOR system that was completed in April 2004, such as ACI World and ACI Pacific, and conducted trainings for site operators. As for the status of installation, 4 DVORs were installed in Gimhae, Jeju VOR/TACs, etc. As well, it will be installed in Uljin airport and Anyang VOR/TAC. For the first time since the development, we achieved to make an exporting contract on DVOR with Bangladesh in May 2007 so that it is expected to accomplish the fruitful result that Koreas navigation aid system makes its debut overseas. For DME, we

Raising integrity and transparency of company image

developed a mock-up DME in December 2006 and the flight inspection will be completed until May 2007. KAC developed Flight Information System, which generalizes FIDS and Ramp Control and sold the system to Incheon International Airport. Also, we are promoting the international marketing with the reformed system, which meets the global standard.

KAC is keeping the management ethics to win public confidence and making transparency of company image. We are doing away with all kinds of irregularities and corruption. Our level of integrity degree is exceeding the average of all public enterprise. In addition, to practice the moral and clarity management, KAC will develop a moral management practice program and expand the bond of sympathy among the executives. In the mean time, we will ensure the system of disclosing information to the public through developing various items of management information and building the instant posting system.
Resources of airport operational technology

In long-term, KAC plans to develop the Localizer (LLZ), FTS, method of Site Survey, Pavement Management System(PMS), control and monitor equipment to turn on/off for each aeronautical light, and halogen ramp in aeronautical lights. Further, among several projects of Defense Acquisition Program Administration under Ministry of National Defense, we will participate in establishment and improvement of projects regarding instrumental landing system (ILS) for 7 areas including Seoul base (Seongnam).

With the resources of accumulated airport operational know-

( OPEN AIRPORT WITH OUR COMMUNITY )

Environmentally friendly management

various counter plans to reduce the noise demage. Expecially, the noise-impacted area was expanded to area around Ulsan and Yeosu airports in December last year. So we are newly promoting active appropriate noise control plans .
Open airport with our community

KAC carried out environmentally friendly conservation plans in various fields including projects on quality of water, soil, sewage and wastewater, and noise levels. We have been maintaining environmental management system (ISO14001) to improve the quality of controlling water, soil, sewage and wastewater, and we have also been keeping the system through regular follow-ups. In addition, KAC established Air Quality Monitoring System to improve the quality of air at Gimpo International Airport. This enables KAC to maintain the monitoring system on the quality of air around the airport area for 24 hours a day.

As a member of the society, KAC has been striving to build a bright and warm society through community contribution activities based on spirits of voluntary self-sacrifice and sharing from the employees and executives to fulfill its responsibilities. We are practicing sacrifice and sharing management through helping disadvantaged sections of the community around us, supporting broken homes, visiting

For noise-impacted area, KAC operated appropriate noise control plans such as installation of noise insulation in houses, setting up the facilities used in common and solving the TV reception problem with budget of 1.2 billion Won. Also, KAC always watched for the high-level noise aircraft to see if they follow the procedure of low-level noise operation and informed the local residents about the noise watch activities regularly through presentation and posting the results on KAC website. As above activities, KAC actively proceeded the

orphanages and nursing homes, and making donations including supporting scholarship to various organizations. At the same time, we are spreading out the activities to develop not just our organization but also the whole community through various personal and material exchanges such as campaigns on sisterly relationship between a company and a community, campaign on organ donation, free medical examination, hair service for solitary elderly persons, environmental protection campaign, and airport tour for the

Korea Airports Corporation _ 2006 Annual Report 26

27

disabled persons. Expecially, we are helping the farmers during the farming season though sisterly relationship between a company and a community, doing free housing maintenance activity for disadvantaged people using by construction and installation skills of KAC employees and donating the goods to poor people. Moreover, a community relations team in charge of public services was newly established to effectively promote concepts and systems of community contribution activities. With a slogan of together with airport, happy community, we organized 23 voluntary service teams and developed systematical voluntary activities. In addition, we are raising welfare funds by voluntarily deducting certain amounts from each pay cheque of all employees and executives who are willing to donate. The company also donates certain amounts in proportion as donations from the employees and the executives(Matching Grant) to support people who need help. KAC is planning to raise the amount of donation for community contribution to more than 2% against the operating revenue.

( AIRPORTS CONSTRUCTION )

Since 2006, KAC has been directly carrying out the construction projects for large-size airports that had been done by the government. KAC has been advancing the facility expansion project with investment of 261 billion won to prepare for the flight demands following the active promotion on Jeju free international city. By the time the expanding project is completed in 2008, the passenger capacity per year will be boosted from 11.27 million at present to 23.03 million; apron capacity per year will be increased from 19 aircraft to 29 aircraft; parking area will be enlarged to take 2,600 cars compared to current capacity of 1,729 cars at Jeju International Airport. As well, the length of runway will be increased from 3,000m to 3,180m, linkage taxiway at right angle and rapid exit taxiway will be expanded and newly built to boost the airports taking off and landing capacity from 32 times per hour to 37 times per hour. It is also expected that the facilities around the runway will be improved to meet the standard of safety management.

story on-ground and one story underground sized new international passenger terminal is completed in October this year at Gimhae International Airport, it will allow passenger traffic capacity to grow to 4.63 million per year from the current capacity of 1.66 million, and the passengers will be able to use the facilities with better satisfaction since parking space of 1,183 cars will be secured.

To ensure the facilities, which meet the requirement of international standard, we will plan to move the road and watercourses to other place and to expand the safety area for the end of landing strip and runway at Ulsan Airport. Also, there will be added more navigational safety facility by expanding the safety area for the end of runway and installing the more advance defense facility at Yeosu Airport.

Muan International Airport, which will play a vital role as a strategic airport in Southwestern area, has been newly built and will be open in the end of 2007. The length of runway at Muan

To deal with the international demand, which has been continuously increasing, new international passenger terminal will be operated from November 2007. When the 3

International Airport will be 2800m?45m with handling capacity of 140,000times per year. As well, the size of passenger terminal will be 29,106F to handle 6.52 million passengers.

Korea Airports Corporation _ 2006 Annual Report 28

29

( DEVELOPMENT OF GIMPO INTERNATIONAL AIRPORT SURROUNDING AREA )

Sky Park project

expected to play a vital role to help the area to be the Mecca of shopping, leisure, and culture in southwestern area of the metropolis.
Promoting public golf town project

Sky Park project has been contracted out to Lotte Shopping Co., Ltd in February 2006, and the construction is planned to be started the latter half of this year following the completion of official permission.

To effectively manage the outskirts of the lands bought since The site expected to be developed as a new theme park in Gimpo International Airport is about 196,874F and is consisted of the parking lot in front of international terminal and green zones at present. 1996 to ensure the buffer green zone(total of 325,680 pyeong, 1,076,63F) to compromise noise level of aircraft and for safe operations at Gimpo International Airport, KAC will drive forward the plan to build a golf town with total of 27 holes. When the required administrative steps are completed in the Sky Park will keep the functions of airport as much as possible while focusing on the establishment of environmentally friendly theme park, and will also be comprised of shopping center, which will make the best use of airport's specialty, and viewing facilities. Areas for environmentally friendly facilities with flowers, tree, pond, water fountain, and illumination will be maximized on the ground level. Theme hotel, theater, restaurants and environmentally friendly entertainment facilities will also be built on the ground level to become a theme park that offers a paradise in the middle of the crowded city with the balanced combination of culture and leisure. As well, complex facilities for shopping, culture, food, and entertainment will be constructed underground of Sky Park. These facilities will be connected to the integrated station to be used by subway line 5 and line 9 and Airport Railroad to ensure the profitability. At the same time, we will ensure underground parking lots to maximize utilization of underground. When completed, Sky Park, along with currently operating commercial facilities, is middle of year 2007, KAC plans to publicly announce an invitation for private companies to contract. This project, which is aimed to start operating in 2011 will be promoted as a environmentally friendly facility including physical training facilities for the surrounding residence.surrounding residence will be built in the area outside of the physical exercise facilities course. It will be a representative environmentally friendly golf town through researching examples within and outside of country.

16:00 p.m.

286,000

KAC Operating flight

17:00 p.m.

Delivering Results
The 14 airports in Korea including Gimpo International Airport operated 286,000 flights in 2006. Although the domestic flight demands were decreased, land transportation improved significantly.

( AIR TRAFFIC STATISTICS )

Achievement of Air Transportation in 2006

- Passengers The total number of passengers was 39,339,000 in 2006. This is showing 2.4% increase from last years figure. Out of the total passengers, the number of domestic passengers was decreased by 0.1% to record 34,262,000people, whereas the number of international passengers increased by 22.8% to record 5,186,000 people. As such, KAC has accomplished a 5 million mark for international passengers while GimpoHaneda route alone achieved 1 million passengers.

- Aircraft movement The 14 airports in Korea including Gimpo International Airport operated 286,000 flights in 2006. Although the domestic flight demands were decreased as land transportation improved significantly, with the help of the increased demands for international routes, the total aircraft movements have increased by 1.6% compared to 2005.

In case of domestic routes, due to the introduction of low cost airlines such as Hansung Airlines and Jeju Air, the demand decrease rate of 11.1% in 2005 was reduced to 0.8% in 2006. - Cargo Although the number of cargo usage in domestic routes has decreased by 4.7% compared to last year, international cargo As regards international routes, the total service showed a growth of 22.2% compared to 2005 as the Gimpo-Haneda route (4 times/day to 8 times/day) was expanded(41.5%) at Gimpo International Airport and international flights at regional airports including Jeju and Cheongju increased. has increased by 20.2% to record 91,169 tons as the international cargo service at Gimpo International Airport started its operation in November 2005 and the number of international routes at regional airports increased significantly.

Korea Airports Corporation _ 2006 Annual Report 32

33

( AIR TRAFFIC STATISTICS )

International Airports
Daily Category Gimpo Int'l Airport Int'l Domestic Gimhae Int'l Airport Int'l Domestic Jeju Int'l Airport Int'l Domestic 8,062 70,549 22.1 193.3 58.3 899,940 2,466 30,712 48.5 4.3 13,573 301,556 37.2 826.2 59.3 -2.5 3.0 11,209,896 15,828 37,107 43.4 101.7 6.7 3.4 2,310,068 4,760,969 6,329 13.044 7.6 -2.8 48,877 86,731 133.9 237.6 -5.9 -13.7 5,893 89,050 16.1 244.0 41.5 1,419,636 3,889 34,255 50.2 -1.3 22,156 252,212 60.7 691.0 139.9 -4.1 -1.7 12,346,887 Flight Average %Change '05/'06 Persons Daily Average %Change '05/'06 Cargo (Tons) Daily Average %Change '05/'06

Other Airports
Daily Category Daegu Gwangju Cheongju Yangyang Yeosu Ulsan Mokpo Sacheon Pohang Gunsan Wonju Flight 3,181 7,930 1,253 12,305 1,510 7,358 41 1,018 6,053 10,150 480 2,442 3,591 1,194 694 Average 8.7 21.7 3.4 33.7 4.1 20.2 0.1 2.8 16.6 27.8 1.3 6.7 9.8 3.3 1.9 %Change '05/'06 8.6 -11 8.1 -2 50.8 20.9 -49.4 55.2 -11.2 -7.7 -4.4 -26.2 -27.7 -12.6 0 Persons 294,672 899,478 124,339 1,505,448 133,748 865,815 4,028 47,519 601,599 1,200,072 16,909 224,792 347,180 155,207 80,361 Daily Average 807 2,464 341 4,125 366 2,372 11 130 1,648 3,288 46 616 951 425 220 %Change '05/'06 -1.3 -4.1 3.5 -1.1 32.4 14.5 -41 -11.8 -2.5 -1.8 -9 -28.9 -25.3 -5.2 6.4 Cargo (Tons) 3,468 16,430 1,384 22,489 1,673 12,142 38 158 2,401 4,347 63 1,582 1,208 1,944 516 Daily Average 9.5 45.0 3.8 61.6 4.6 33.3 0.1 0.4 6.6 11.9 0.2 4.3 3.3 5.3 1.4 %Change '05/'06 2.5 -4.4 4.6 -4.1 20.3 -0.1 -30.2 -6 -2.8 0.8 -10.2 -17.3 -28 18 8.4

Int'l Domestic Total

35,768 249,921 285,689

98.0 684.7 782.7

22.2

5,186,431

14,209 93,869 108,078

22.8 -0.1 2.4

91,169 703,779 794,948

249.8 1,928.2 2,177.9

20.2 -4.7 -2.4

-0.8 34,262,132 1.6 39,448,563

( FIVE YEARS TRAFFIC STATISTICS )

GIMPO

Year

2002 138 128,290 128,428 -16.7 9,900 17,082,195 17,092,095 -22.5 89 302,151 302,240 -57.3

2003 379 125,964 126,343 -1.6 49,675 16,830,966 16,880,641 -1.2 501 290,230 290,731 -3.8

2004 2,985 102,938 105,923 -16.2 614,741 14,227,212 14,841,953 -12.1 5,058 292,210 297,268 2.2

2005 4,166 90,621 94,787 -10.5 944,948 12,503,204 13,448,152 -9.4 9,235 263,069 272,303 -8.4

2006 5,893 89,050 94,943 0.2 1,419,636 12,346,887 13,766,523 2.4 22,156 252,212 274,368 0.8

Aircraft Movements (Unit: Flights)

Int'l Domestic Total % Change

Passengers (Unit: Persons)

Int'l Domestic Total % Change Cargo (Unit: Tons) Int'l Domestic Total % Change

Month-to-Month Changes
AIRCARFT MOVEMENT
8,300 8,640 8,018 7,650 7,122 7,859 7,478 7,865 7,740 7,802 8,323 8,146

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

PASSENGERS (IN THOUSAND)

1,263 1,218 1,109 1,006 1,118 1,108 1,033 1,105 1,261 1,229 1,185 1,132

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

CARGO(TON)
25,053 24,096

29,509 24,189 22,771 19,895 18,161 20,554 18,553 24,086 21,974

25,528

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

Korea Airports Corporation _ 2006 Annual Report 34

35

( FIVE YEARS TRAFFIC STATISTICS )

GIMHAE

Year

2002 12,575 47,515 60,090 -1.9 1,810,786 7,362,502 9,173,288 0.1 60,219 144,245 204,464 0.6

2003 11,965 46,635 58,600 -2.5 1,626,618 7,156,217 8,782,835 -4.3 58,142 127,232 185,374 -9.3

2004 12,740 39,472 52,212 -10.9 1,953,234 5,720,919 7,674,153 -12.6 58,449 117,401 175,850 -5.1

2005 14,838 35,897 50,735 -2.8 2,146,511 4,899,295 7,045,806 -8.2 51,915 100,492 152,407 -13.3

2006 15,828 37,107 52,935 4.3 2,310,068 4,760,969 7,071,037 0.4 48,877 86,731 135,608 -11.0

Aircraft Movements (Unit: Flights)

Int'l Domestic Total % Change

Passengers (Unit: Persons)

Int'l Domestic Total % Change Cargo (Unit: Tons) Int'l Domestic Total % Change

Month-to-Month Changes
AIRCARFT MOVEMENT
4,874 4,453 4,332 3,875 4,314 4,304 4,539 4,356 4,246 4,631 4,402 4,609

Jan

Feb

Mar

Apr
632

May

Jun

July

Aug
659

Sep

Oct
640

Nov

Dec

PASSENGERS (IN THOUSAND)

597 579

610 559 523 541 543

618 571

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

CARGO(TON)
12,467 11,890

13,314 12,062 11,884 10,659 10,084 10,674 10,564 10,709 10,534 10,767

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

( FIVE YEARS TRAFFIC STATISTICS )

JEJU

Year

2002 2,685 65,996 68,681 13.3 318,220 9,621,480 9,939,700 6.6 8,107 329,643 337,750 2.4

2003 2,835 74,234 77,069 12.2 297,246 10,505,743 10,802,989 8.7 6,272 333,227 339,498 0.5

2004 4,049 72,026 76,075 -1.3 459,962 10,644,379 11,104,341 2.8 7,431 319,945 327,375 -3.6

2005 5,093 68,463 73,556 -3.3 605,898 10,749,027 11,354,925 2.3 8,518 309,321 317,839 -2.9

2006 8,062 70,549 78,611 6.9 899,940 11,209,896 12,109,836 6.6 13,573 301,556 315,129 -0.9

Aircraft Movements (Unit: Flights)

Int'l Domestic Total % Change

Passengers (Unit: Persons)

Int'l Domestic Total % Change Cargo (Unit: Tons) Int'l Domestic Total % Change

Month-to-Month Changes
AIRCARFT MOVEMENT
7,246 6,645 6,429 6,281 6,238 5,407 6,283 6,637 6,560 7,156 6,772 6,948

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

PASSENGERS (IN THOUSAND)

1,160 1,186 975 905 873 821 959 1,260 1,111 936 898 1,026

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

CARGO(TON)
28,136 27,681

34,093

28,798 25,326 24,355 27,304

28,712 24,494 23,226 21,139 21,864

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

Korea Airports Corporation _ 2006 Annual Report 36

37

( FINANCIAL STATEMENTS BALANCE SHEET : KAC )

(In million of Korean won)

Year ended December 31, 2006 Assets Current Assets Quick Assets Inventories Fixed Assets Investment Assets Tangible Fixed Assets Intangible Fixed Assets Liabilites Current Liabilites Fixed Liabilites Capital Capital stock Capital Surplus Reserve Retained Earnings Capital adjustments Total Liabilities and Capital

2006 2005 2004 2,383,079 2,336,972 2,009,899 367,591 296,840 261,473 361,081 290,712 255,572 6,510 6,128 5,901 2,015,488 36,820 1,503,820 474,848 109,374 83,240 26,134 2,273,705 2,089,741 143,574 40,390 2,040,132 60,353 1,501,285 478,494 102,605 72,406 30,199 2,234,367 2,089,741 2,804,430 (-)2,660,745 941 1,748,426 54,286 1,313,092 381,048 102,545 67,515 35,029 1,907,354 4,605,588 (-)2,698,233

2,383,079 2,336,972 2,009,899

( FINANCIAL STATEMENTS STATEMENT OF PROFIT AND LOSS : KAC )

(In million of Korean won)

Year ended December 31, 2006 Operating Revenues Rentals Aviation Revenue Facility Usage Revenue Airport Sales Others Operating Expenses Maintenance and Repairs Cost of Sales Gross Profit from Operations General and Administrative Expenses Operating Profit Non-Operating Revenue Non-Operating Expenses Ordinary Profit Extraordinary Income Extraordinary Expenses Net Income before Income Taxes Income Taxes Net Income

2006 313,805 144,291 44,581 124,161 772 273,685 273,685 -

2005 2004 293,044 282,426 134,127 125,235 41,143 39,651 117,108 116,609 649 666 282 256,358 256,358 36,686 25,221 11,465 30,836 4,813 37,488 37,488 37,488 231,646 231,355 291 50,780 22,286 28,494 22,829 1,577 49,745 49,745 49,745

40,120 37,211 2,909 39,954 3,721 39,142 1,138 1 40,279 40,279

Korea Airports Corporation _ 2006 Annual Report 38

39

( FINANCIAL STATEMENTS STATEMENT OF PROFIT AND LOSS )

(In million of Korean won)

Gimpo Year ended December 31, 2006

Operating Revenues Rentals Aviation Revenue Facility Usage Revenue Airport Sales Others Operating Expenses Maintenance and Repairs Cost of Sales

2006 143,730 73,497 17,897 52,034 302 102,258 102,258 -

2005 2004 132,632 128,757 68,899 66,998 16,018 14,490 47,481 46,492 649 234 128 103,048 103,048 95,793 95,502 291

General and Administrative Expenses Non-Operating Revenue Non-Operating Expenses Extraordinary Income Extraordinary Expenses Income Taxes Net Income

32,675 34,508 2,575 858 41,588 72,383 34,783 11,057 26,492 51 41,106 41,106 1,802 526 90 32,643

20,500 27,210 3,219 33,075 70,026 33,799 10,667 25,512 48 38,484 38,484 1,620 1,154 32,008

18,369 19,591 179 34,007 68,828 32,728 10,411 25,658 31 34,222 34,222 797 258 35,145

Gimhae
Operating Revenues Rentals Aviation Revenue Facility Usage Revenue Airport Sales Others Operating Expenses Maintenance and Repairs Cost of Sales General and Administrative Expenses Non-Operating Revenue Non-Operating Expenses Extraordinary Income Extraordinary Expenses Net Income

( FINANCIAL STATEMENTS STATEMENT OF PROFIT AND LOSS )

(In million of Korean won)

Jeju Year ended December 31, 2006

Operating Revenues Rentals Aviation Revenue Facility Usage Revenue Airport Sales Others Operating Expenses Maintenance and Repairs Cost of Sales General and Administrative Expenses Non-Operating Revenue Non-Operating Expenses Extraordinary Income Extraordinary Expenses Net Income

2006 65,357 28,765 10,804 25,708 80 42,946 42,946 1,515 393 101 23,634 32,335 7,245 4,823 19,928 339 87,374 87,374 -

2005 58,324 24,468 9,573 24,210 73 39,963 39,963 1,174 120 19,415 32,062 6,961 4,885 19,905 311 74,863 74,863 4,721 832 320 (47,010)

2004 50,976 18,369 9,121 23,484 2 34,276 34,276 1,013 152 17,561 33,747 7,140 5,629 20,975 3 67,354 67,354 -

Other Branches
Operating Revenues Rentals Aviation Revenue Facility Usage Revenue Airport Sales Others Operating Expenses Maintenance and Repairs Cost of Sales General and Administrative Expenses Non-Operating Revenue Non-Operating Expenses Extraordinary Income Extraordinary Expenses Net Income

4,536 2,129 225 1 (57,672)

3,918 1,428 987 (36,969)

Korea Airports Corporation _ 2006 Annual Report 40

41

( FINANCIAL STATEMENTS STATEMENT OF CASH FLOWS )

(In million of Korean won)

Year ended December 31, 2006 Cash flows from operating activities Net income Adition of expenses not involving cash outflows Deducation of revenues not invoving cash inflows Change of asset and liability from operating activities Cash flows from investing activities Cash inflows from investing activities Cash outflows for investing activities Cash flows from financing activities Cash inflows from financing activities Cash outflows from financing activities Increase in cash Cash at beginning of the year Cash at end of the year

2006 110,663 40,279 78,103 (4,038) (3,681) (164,111) 338,284 (502,395) 2,221 (2,221)

2005 88,948 37,488 63,746 (103) (12,183) (253,265) 224,979 (478,244) 3,176 (3,176)

2004 95,731 49,745 59,167 (1,263) (11,918) (30,043) 11,692 (41,735) 3,379 2,880 (6,259) (62,309) 167,952 230,261

(53,448) (164,316) 65,945 230,261 12,497 65,945

EPILOGUE
Ideal balance with growth and share To fulfill its social responsibilities, KAC! We are practicing sacrifice and sharing management

We have lofty aims.

We will put our endless efforts to be 'a globally recognized organization specializing in airport management that provides impressive customer services and fulfills its social responsibilities.

You may see new future of KAC.

274, Gwahae-dong, Gangseo-gu, Seoul, Korea Airports Corporation Tel : +82-2-2660-2114 Http: // www.airport.co.kr