Korean Air Lines posted a third-quarter net loss on 5 November of 385.93 billion won (US$342 million) compared to a 211.85 billion won net loss in the third quarter last year. It swung to loss from the second quarter’s 162.41 billion won net profit, primarily due to factors related to interest payments and the exchange losses. The airline, like the rest of the industry, is suffering from a near total shutdown in international flights although it’s cargo business and domestic business have helped it weather the COVID-19 pandemic.
The airline reported 1.55 trillion won in revenue, down 52.8 percent on the year and down 8.3 percent compared to the previous quarter. Its operating profit nosedived 93.6 percent on year to 7.59 billion won in the second quarter. Compared to the previous quarter, the operating profit was down 94.9 percent. Revenue from the cargo transportation business reached 1.16 trillion won in the third quarter. The airline said it raised the operation rate of cargo carriers amid the increased freight rates. It also remodelled the interior of its passenger aircraft to carry more cargo.
“Decline in travel demand from COVID-19 is projected to continue in the fourth quarter, but demand for cargo is expected to increase due to seasonal factors,” said Korean Air Lines. Semiconductors, auto parts and disinfectant items following the resurgence of the pandemic are expected to increase the demand for air cargo, especially at a time when supply of transportation by cargo ships has fallen.
The airline has set up a task force team responsible for the delivery of vaccines that could be developed early next year. Korean Air achieved a revenue of KRW 1.55 trillion (USD 1.32 billion) and operating profit of KRW 7.6 billion (USD 6.47 million) in the third quarter, marking the second consecutive quarter it recorded a profit. Increase in cargo operation rates and the expansion of cargo transport, such as the utilisation of passenger planes, enabled an operating profit despite the fall in sales by 53 percent year-on-year due to the decrease in passenger demand caused by COVID-19.
The airline’s cargo business earned 1.16 trillion won (US$988 million) in sales, surpassing the second quarter sales of 1 trillion won (US$852 million). The carrier maximised profits by boosting freighter operation rates and using grounded passenger planes to increase cargo supply and payload rates. In particular, Korean Air was the first national airline to convert a passenger plane into a freighter through the removal of cabin seats. Loading cargo in the cabin increased cargo supply and the removal of seats reduced fuel costs due to the decreased aircraft weight.
Passenger demand is expected to continue to decline in the fourth quarter due to the prolonged pandemic. However, cargo demand will increase as the freight business enters its peak season. In particular, high demand is forecasted for traditional air cargo such as semiconductors, auto parts and e-commerce supplies. The air cargo business will also benefit from urgent medical supply demand regarding COVID-19 and the lack of marine transportation availability, such as container ships.
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