Flag carrier Korean Air announced last week it had narrowed its 2021 first-quarter loss to US$25 million from US$610 million for the same period last year thanks to higher cargo revenues. The airline also said it has signed an engine repair deal with Asiana Airlines for US$260 million.
Korean Air said its recorded a fourth consecutive quarter of operating profit of KRW124.5 billion (US$110 million) thanks to its continuous efforts to boost cargo operations and reduce costs. Overall sales fell 24 percent year-on-year to KRW1.7498 trillion (US$1.544 billion) due to passenger demand drop caused by the COVID-19 pandemic. Compared to 2020 Q1, cargo sales more than doubled to KRW1.353 trillion. Despite decreased passenger flight belly capacity because of the pandemic, Korean Air maximised cargo operations by fully utilising its 23 freighters, operating cargo-only flights using passenger aircraft and converting passenger jets into freighters.
“Passenger demand is still low due to continued travel restrictions,” the airline said. “Despite the challenges, Korean Air boosted passenger sales by operating chartered flights for repatriation and business as well as ‘flights to nowhere’”.
Korean Air said its cargo business in the second quarter is expected to be positive due to a lack of belly cargo supply of passenger flights, a recovery of global trade, and increased shipping and logistics demand. Korean Air plans to promote its cargo business now using its network, operations and experience rather than later this year when more airlines jump into the cargo business and shipping disruption improves.
Korean Air secured KRW3.35 trillion last year by the sale of its inflight catering and duty-free business, issuing new shares, and loans. In March this year, the airline also raised an additional KRW3.3 trillion in new stock. As a result, the airline’s financial stability has rapidly improved, which decreased its debt ratio from 340 percent to 294 percent at the end of last year. Korean Air will continue its effort to expand its capital and improve its financial structure through the sale of non-core assets this year.
Meanwhile, Korean Air and Asiana Airlines announced they have signed a US$260 million maintenance deal in which Korean Air will fix 22 Pratt & Whitney PW4090 engines for Asiana Airlines. The contract is the largest aviation maintenance deal signed between the two. The 22 PW4090 engines will go through maintenance at Korean Air’s Bucheon engine maintenance facility in Gyeonggi Province for the next five years. The contract includes regular maintenance and repairs. For the last two decades, Asiana Airlines had an engine-maintenance contract with Pratt & Whitney. But the contract ended and Asiana chose Korean Air to continue the task.