Air Cargo, Once Overlooked, Becomes a Hero Amid COVID-19 Pandemic

Supply Reduction Caused by COVID-19... National Airlines Take Steps Such as Passenger Aircraft Conversion

On the afternoon of the 24th, Asiana Airlines personnel are loading cargo onto an A350 passenger aircraft at Terminal 1 of Incheon International Airport. To continue its strong performance in the second quarter, Asiana Airlines converted 283 economy seats on one A350-900 passenger aircraft into cargo space. This modification allows for an additional 5 tons of cargo, enabling the transport of 23 tons of cargo per flight. Photo by Airport Photojournalists Group

[Asia Economy Reporter Yu Je-hoon] In the prolonged phase of the novel coronavirus infection (COVID-19), the air cargo divisions of national airlines are proving to be a cash cow. Although this is largely due to a sudden reduction in supply rather than an increase in cargo volume, these divisions have become the only source of income for national airlines amid an unprecedented recession.

According to the aviation industry on the 2nd, as of the second quarter, Korean Air and Asiana Airlines recorded cargo division sales of 1.2259 trillion won and 637.9 billion won, respectively. This represents a 94% increase compared to the second quarter results of last year, before the COVID-19 outbreak.

Thanks to the strong performance of the air cargo business, both companies posted operating profits of 148.5 billion won and 115.1 billion won in the first half of this year. While sales in their main passenger divisions dropped by more than 90% due to COVID-19, the air cargo divisions acted as a safety net.

The air cargo business thrived due to the global suspension of passenger flights. Typically, 30-40% of air cargo is transported via belly cargo (cargo holds under passenger aircraft) rather than dedicated cargo planes. However, with the widespread suspension of passenger routes by global airlines due to COVID-19, supply sharply decreased. Although airlines have recently deployed passenger planes and passenger planes converted into cargo aircraft for freight transport, these efforts have been insufficient to fill the reduced supply.

According to the Hong Kong TAC Air Freight Index, in the second week of May, air freight rates on the Hong Kong-North America route soared to $8.47 per kilogram. This is more than 2.2 times the rate of $3.83 per kilogram during the same period last year. Although recent air freight rates are lower than their peak, they still remain about 30% higher than the previous year.

In response, Korean Air and Asiana Airlines have converted their main aircraft such as the B777 and A350 into cargo planes to expand cargo supply. An industry insider said, "Due to Korea’s manufacturing-focused nature, both Korean Air and Asiana Airlines have continuously maintained their cargo businesses, unlike foreign airlines. At one point, they competed among the world’s top ranks, and since the 2010s, both companies have actively restructured to secure profits, enabling them to maintain competitiveness."

Following the surprising performance of major airlines, low-cost carriers (LCCs) are also considering entering the cargo market. Although this does not align well with the LCC operating model, it is one of the desperate measures to survive the special circumstances of COVID-19. In fact, Jin Air plans to convert its B777-200ER into a cargo-only aircraft and deploy it on cargo routes after the holidays. T’way Air is also reportedly reviewing the expansion of its cargo operations.

Meanwhile, the industry cautiously predicts that the cargo division will continue to perform well in the fourth quarter. Although freight rates may decline somewhat as airlines worldwide increase cargo supply, demand is expected to remain strong due to emergency medical supplies for COVID-19 and the surge in e-commerce shipments ahead of the year-end holidays.

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