New products, new markets for Korean Cargo

After facing the biggest demand fall in aviation’s history in 2009, businesses restarted again in 2010 with airlines ending last year slightly ahead of early-2008 volumes albeit with a dismal 2.7 per cent profit margin.


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New products, new markets for Korean Cargo

After facing the biggest demand fall in aviation’s history in 2009, businesses restarted again in 2010 with airlines ending last year slightly ahead of early-2008 volumes albeit with a dismal 2.7 per cent profit margin. Following the global financial crisis, air freight volumes reached their post-recession peak in May 2010, largely driven by re-stocking. But the joy was short lived and from about July this year, global freight markets began stagnating with a 0.4 percentage point demand decline over previous year levels, contracting by a further 3.8 per cent in August as economic uncertainty in the US and Europe clouded the global economic outlook. The downturn saw the International Air Transport Association (IATA) slashing its full-year volume growth projection from 5.5 per cent to 1.4 per cent and grimly foretelling what likely lies ahead. Airlines are expected to uplift 46.4 million tonnes of cargo in 2011, down from the previous forecast of 48.2 million tonnes, reflecting the languid state of the industry. “It appears unlikely that a revival in air freight will begin before 2012,” IATA’s director general and CEO Tony Tyler warned. This scenario, played out in virtual carbon-copy across the industry, is New products, new markets for Korean Cargo Faced – like virtually the entire air cargo industry – with innumerable challenges including rising competition, slowing US demand and the European debt crisis, fuel costs and foreign exchange fluctuations, Korean Air Cargo has returned to basics of focusing on quality, new products and emerging markets. Wong Joon San reports. exemplified by Korean Air Cargo’s own experience. The carrier’s cargo division transported 1.8 million tonnes in 2010 achieving a robust 14 per cent increase over 2009’s low point. But this year from January to September a different picture emerges with Korean uplifting 1.28 million tonnes – a decrease of five per cent over the same period in the previous year. And the situation worsens in the second half with the July to September period seeing cargo down further at 5.9 per cent down on the same period a year earlier as demand for South Korea’s electronics products flags with the the global economic lethargy. This ultimately pushed Korean Air into a third-quarter net loss of 524.3 billion won (US$457.5 million) – compared to a net profit of 550.7 billion won in the same quarter a year earlier – due to a combination of higher fuel prices, slowing exports and currency adjustments. And while the first half of the year saw South Korean exports on the rise, “the forecast for the last half of this year is rather unclear due to the economic downturn in both US and some regions in Europe, which has increased uncertainty with continuation of high fuel price and foreign exchange fluctuations,” says Park Bum Jung, vice president, Cargo Strategy & Development Department, at Korean Air. “However, as we have overcome this kind of uncertainty in the past, Korean Air will continue to improve its performance by developing emerging markets where high growth is expected, and also by establishing detailed counterplans to meet the changing business environment,” he explains.