Airline Industry's Bleak Earnings Season "More Concerned About Q2"

The departure hall of Terminal 1 at Incheon International Airport is quiet on the 29th, ahead of the golden holiday weekend. Photo by Moon Honam munonam@

[Asia Economy Reporter Yu Je-hoon] The aviation industry is set to begin its full-scale announcement of the 'bleak' first-quarter earnings this week. Amid inevitable massive losses due to the COVID-19 pandemic, concerns are growing within the industry about the impact of the pandemic on the second-quarter earnings, when the effects are expected to become more pronounced.

According to the aviation industry on the 11th, Jeju Air, the first among airlines to announce its earnings, recorded an operating loss of 65.7 billion KRW and a net loss of 101.4 billion KRW in the first quarter. This figure is about twice the total operating loss (32.9 billion KRW) and net loss (33.1 billion KRW) of the entire previous year.

Revenue also amounted to only 229.2 billion KRW, a 41.7% decrease compared to the previous year. Even in the first quarter, considered the 'peak season' for the aviation industry, a record drop in revenue was observed. This is attributed to the gradual suspension of international routes from late February due to COVID-19, which not only increased operating losses but also widened the revenue decline.

The earnings outlook for other airlines preparing to announce their results is also not optimistic. The securities industry expects the operating losses of domestic airlines in the first quarter to reach 201.5 billion KRW for Korean Air, 233.3 billion KRW for Asiana Airlines, 48.7 billion KRW for Jin Air, and 37.8 billion KRW for T'way Air.

The problem lies in the upcoming second quarter. The industry believes that since the suspension of international flights became full-scale from March to April, the second-quarter earnings are likely to worsen further. In particular, the second quarter, along with the fourth quarter, is considered a representative 'off-season' period for the aviation industry.

An industry insider said, "At least in the first quarter, normal operations were somewhat possible from the peak season of January to early February," adding, "In the second quarter, international flights were almost completely blocked until April and May, and domestic demand has not recovered, so the situation is expected to be worse."

Airlines are also desperately securing cash flow beyond government financial support. A representative example is the low-cost carriers (LCCs) competitively expanding domestic routes ahead of the golden holiday season. Additionally, the industry is cautiously exploring partial expansion of international routes next month. Korean Air plans to resume operations on 19 routes including North America and Europe next month, and Asiana Airlines resumed flights on the San Francisco and Tokyo (Narita) routes as of the 1st. Other low-cost carriers (LCCs) are also reportedly reviewing this internally.

However, with signs of the previously quiet COVID-19 situation reigniting, these plans cannot be taken for granted. Professor Hee-young Heo of Korea Aerospace University said, "Even global aviation consulting firms like CAPA are extending the turnaround period, which was previously predicted for the fourth quarter," adding, "From now on, the aviation industry may face a full-scale crisis."

This content was produced with the assistance of AI translation services.