Asiana Airlines to Return to Profit in Q2... but Acquisition Uncertainty Looms Dark Cloud

[Asia Economy Reporter Song Hwajeong] Asiana Airlines is expected to return to profitability in the second quarter of this year due to strong performance in the cargo sector. However, uncertainties surrounding the acquisition have delayed structural improvements, making next year's performance uncertain.

According to Korea Investment & Securities, Asiana Airlines is estimated to have recorded sales of 919.8 billion KRW and an operating profit of 55.5 billion KRW in the second quarter. Although sales decreased by 47% compared to the same period last year, operating profit is expected to turn positive. Choi Gyo-woon, a researcher at Korea Investment & Securities, said, "Despite the collapse of the passenger market due to the novel coronavirus disease (COVID-19), the cargo sector unexpectedly benefited, resulting in Asiana Airlines' operating profit improving compared to the same period last year." He added, "International and domestic passenger numbers are expected to decline by 90% and 62%, respectively, but cargo is estimated to have doubled." With most passenger flights worldwide suspended, the supply of belly cargo using passenger aircraft also decreased, leading to an unprecedented shortage in the air cargo market. Researcher Choi explained, "It is estimated that over 40% of global air cargo volume is transported via passenger aircraft. Especially since few airlines, like Korea's two major national carriers, operate dedicated cargo planes, Asiana Airlines' cargo freight rates are expected to have surged by 102% compared to the same period last year."

Operating profits in the airline industry during the second quarter are considered rare achievements globally. Researcher Choi said, "While the resumption of international passenger flights is delayed ahead of the summer peak season, the relative superior performance of the two major national carriers engaged in cargo business is expected to continue in the second quarter." He added, "Major U.S. full-service carriers (FSCs) are downsizing their fleets, and especially Cathay Pacific, a major cargo competitor in Asia, has entered bailout status, allowing Asiana Airlines to stay ahead in competition not only against domestic low-cost carriers (LCCs) but also overseas FSCs."

However, expectations for next year's performance should be lowered due to acquisition uncertainties. Researcher Choi explained, "With HDC Hyundai Development Company's acquisition stuck in limbo, capital expansion and structural improvements are delayed. Since the company was already operating at a loss before COVID-19, it cannot guarantee profitability next year when the cargo-related windfall disappears."

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