Q1 Forecasted Continuous Losses in the Aviation Industry: 'Outlook Remains Unclear'

"The second quarter, when flight suspensions became full-scale, will be even more difficult"

On the 29th, the duty-free shop at Terminal 1 of Incheon International Airport is quiet. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Yu Je-hoon] The aviation industry posted a deficit in the first quarter due to the impact of the novel coronavirus infection (COVID-19) crisis. However, concerns about the second quarter performance, when the effects of COVID-19 became more pronounced, are growing within the industry.

According to the industry on the 16th, all six listed domestic airlines recorded losses in the first quarter. Asiana Airlines posted an operating loss of 208.2 billion KRW, Jeju Air 65.7 billion KRW (consolidated basis), Jin Air 31.3 billion KRW, T'way Air 22.3 billion KRW, and Air Busan 38.5 billion KRW.

Korean Air recorded an operating loss of 56.6 billion KRW (separate basis), which was about half of the market's expected loss range (100 to 200 billion KRW), thanks to a boom in the air cargo market and cost reductions, but it was still a loss.

Revenue also declined. Korean Air's revenue was 2.3523 trillion KRW, down 22.7% compared to the same period last year, and Asiana Airlines recorded 1.1295 trillion KRW, a 21.5% decrease. Low-cost carriers (LCCs) also showed a massive revenue decline of 30 to 50%.

This is interpreted as a result of countries strengthening entry controls from mid-February due to the COVID-19 crisis, leading to the suspension of international routes. In fact, the number of international passengers at Incheon Airport last month dropped by 97.3% compared to the previous year.

The problem is that the situation remains at 'zero visibility' going forward. In the first quarter, most routes except some, such as China, were operating normally from January to mid-February, but since last month, when the second quarter began, international flights have been almost 'shut down.' An industry insider said, "Thanks to normal operations in January, the deficit was reduced," adding, "The second quarter will be even more devastating."

Korean Air and Asiana Airlines plan to double their international flights next month, but whether this will lead to profitability remains uncertain. This is largely a preemptive response considering the recovery trend in the international market and the cargo market rather than a full-fledged demand recovery.

Some LCCs are also considering resuming international flights while expanding domestic routes, but the situation is not favorable. Domestic flight load factors have returned to pre-Golden Week levels as supply has increased faster than the recovery in domestic demand.

An aviation industry official said, "International flights will gradually increase from June, but it will take at least one to two years to return to pre-COVID-19 levels," adding, "Going forward, cost reduction and cargo operations will be the biggest issues for survival."

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