Korean Air Posts Operating Profit of 238.3 Billion KRW Last Year... Driven by Cargo Surplus (Comprehensive)

[Asia Economy Reporter Dongwoo Lee] Korean Air performed well last year by achieving an operating profit amid the COVID-19 crisis. The proactive strengthening of its cargo transportation business offset the reduced revenue from the passenger business.

Korean Air announced on the 4th that its operating profit for last year, based on separate financial statements, was 238.3 billion KRW. Although this is a 17% decrease compared to the previous year's operating profit of 286.4 billion KRW, it managed to remain profitable despite the COVID-19 crisis.

During the same period, sales decreased by 39.8% to 7.405 trillion KRW from 12.2916 trillion KRW the previous year, and the net loss for the period was significantly reduced from 568.7 billion KRW to 228.1 billion KRW.

Passenger revenue fell by 74% compared to the previous year, but cargo revenue recorded 4.2507 trillion KRW, an increase of 66% year-on-year. Some shipping demand shifted to air transport, driving the increase in air cargo revenue.

Although belly cargo transportation (cargo hold under passenger aircraft), which accounts for a large portion of cargo supply, decreased, Korean Air increased the utilization rate of its existing fleet of 23 large cargo aircraft by 25% compared to the previous year.

In addition to utilizing idle passenger aircraft, the company also increased supply capacity by converting passenger aircraft into cargo planes for the first time domestically. More than 4,500 air cargo flights are operated annually using idle passenger aircraft.

Korean Air stated, "We were able to achieve good results due to the strong air cargo freight rates caused by a global decrease in air cargo supply relative to demand."

Efforts to improve productivity and reduce costs also led to improved profitability. Fuel consumption and aviation fuel costs decreased due to reduced passenger supply and lower oil prices, and related costs such as facility usage fees decreased due to fewer passenger flights. Labor costs also slightly decreased as employees took rotational leave.

Decision to Acquire Asiana Airlines... Focus on Self-Help Efforts

Korean Air is improving its financial structure through proactive self-help efforts such as asset sales after COVID-19. Last year, it completed a paid-in capital increase of 1.1193 trillion KRW and sold its in-flight meal tray business for 981.7 billion KRW. The sales of Wangsang Leisure Development and Kal Limousine are also in the final stages.

Through a planned paid-in capital increase of 3.3 trillion KRW scheduled for March, Korean Air plans to secure liquidity and improve its financial structure. The Post-Merger Integration (PMI) for the Asiana Airlines merger is also progressing smoothly.

Korean Air plans to further strengthen its current air cargo business strategy by flexibly adjusting air cargo supply and proactively responding to market environment changes, as the air cargo market is expected to recover to 2019 levels this year.

Once COVID-19 vaccinations begin, Korean Air plans to actively engage in vaccine transportation from the second quarter, centered on a vaccine transport task force.

However, considering that the normalization of the air passenger market is difficult to predict unlike the air cargo market, Korean Air intends to maintain passenger supply at the current level until the second half of this year when the vaccine effects are expected to fully manifest.

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