Cargo uptick to lift Q2 earnings for South Korea’s airlines
Analysts expect Korean Airlines’s Q2 cargo sales to jump 92.6 percent YoY, as Asiana Airlines’ cargo sales skyrocket 104.8 percent.
July 27, 2020
By PLA Editor
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Korean Airlines seems to be moving back to profitability as its cargo business does well and helps balance the loss of passenger traffic, JoongAng Daily’s Jin Min-ji reports.
Amidst increasing freight rates and relatively lower fuel and labour costs, Korean Air Lines expects to report a net profit of KRW 149 billion (US$124 million) in the second quarter, according to Hanwha Investment & Securities. This would be a turnaround from the KRW 736.86 billion (US$616 million) net loss reported in the first quarter.
Whilst revenue will be down on year, the report noted, cargo sales are expected to reach KRW 1.2 trillion (around US$1.1 billion), up 96.2 percent on year, with freight charges expected to spike given the increased cargo traffic as a result of low passenger volume.
“Around 30 percent of air cargo is transported via passenger aircraft globally,” Hong Seok-yun, a spokesperson for Korean Air Lines, told JoongAng Daily in a statement. “But following the international lockdowns, that 30 percent of the air cargo transportation has diminished. The decreased supply helped raise transportation prices, improving the profit model.”
Despite the lack of restrictions for air cargo transport, the airline said that it is currently reviewing the removal of seats from two of its passenger aircraft to transport more cargo, which would need approval from the Ministry of Land, Infrastructure and Transport and Boeing for functional reasons, Hong said.
Meanwhile, Asiana Airlines is also cashing in from its cargo business, as sales generated jumped 104.8 percent on year in the second quarter, the report shared. Net profit for the second quarter is projected at KRW 1 billion (US$20.3 million), according to Eugene Investment & Securities, which would reverse the KRW 683.26 billion (US$570.8 million) net loss in the first quarter.
As of June, Korean Air Lines operated 23 cargo planes, whilst Asiana Airlines operates 12 cargo carriers. Freight deliveries kept the Korean Airlines busy in June despite muted passenger travel with strong demand for medical and chip supplies, Pulse said in an earlier report.
Both airlines are scheduled to release their second quarter earnings in mid-August.