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[Image source=Yonhap News]

[Asia Economy Reporter Yu Je-hoon] The New Year's messages from CEOs of national airlines in 2021 can be summarized with the keywords 'survival' and 'integration.' This is because the aftermath of the unprecedented crisis caused by the novel coronavirus infection (COVID-19) that plunged the aviation industry into turmoil last year is expected to continue this year. The aviation industry is expected to endure the recession this year through air cargo business and accelerate structural reforms such as integration in preparation for the post-COVID era.

According to the aviation industry on the 4th, national airlines have established management plans this year, anticipating that the business environment may worsen further due to slow demand recovery caused by COVID-19. A national airline official said, "Passenger demand may gradually recover this year, but if it leads to moderate demand expansion and increased flights, a situation where neither side is satisfied could occur," adding, "We have established this year's management plan based on the assumption that the overall environment will worsen."

In fact, the International Air Transport Association (IATA) predicted in a report published at the end of last year that the net loss of airlines worldwide this year will reach about $38.7 billion (approximately 42 trillion KRW). Although this is an improvement compared to the estimated loss of $118.5 billion the previous year, it is still a significant amount.

Accordingly, the 'endurance' for survival of national airlines is likely to continue throughout this year. Korean Air and Asiana Airlines, which are scheduled for mergers and acquisitions (M&A) this year, are expected to maximize cargo revenue along with continuous efforts to reduce fixed costs. As of the 21st of last month, air cargo rates on the Hong Kong-North America route were $8.08 per kilogram, more than 120% higher than the previous year. Due to the continued suspension of international passenger flights caused by COVID-19 and the increased demand for vaccine transportation, it is unlikely that a sharp drop in rates will occur.

Low-cost carriers (LCCs) are expected to focus on minimizing fixed costs to reduce losses, as they did last year. Unlike major airlines, they have limited opportunities for cargo sales.

Along with this, structural reorganization among national airlines is expected to accelerate. Korean Air will hold an extraordinary shareholders' meeting this month in preparation for a paid-in capital increase, followed by a paid-in capital increase of 2.5 trillion KRW in March to complete the acquisition process by the first half of the year. Once the acquisition is completed, the three-way integration among LCCs such as Jin Air, Air Busan, and Air Seoul, as well as the post-merger integration (PMI) process for the integration of Korean Air and Asiana Airlines, are expected to be fully underway.

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