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Cargo Fuels Korean, Asiana Profits

Madhu Unnikrishnan

August 10th, 2020

Believe it or not, while airlines the world over lamented the worst quarter in the air transport industry’s century-long history, two airlines actually made money. But not by carrying passengers. Korean Air and Asiana reported profits of $133 million and $95 million, respectively, despite revenues falling 44% and 45%. This translated into an operating margin of 9% for Korean and 14% for Asiana, as we reported in this week’s Airline Weekly.

Going into the crisis, both airlines already had strong cargo businesses, thanks to South Korea’s immense electronics-manufacturing industry. Electronics, remember, are one of the air freight industry’s most profitable goods to transport. Both airlines also were buoyed by transporting medical equipment. In the best of times, Korean and Asiana make a lot of money from their robust freight operations, but trade tensions had eaten into that. With international passenger traffic at all but a standstill — which takes a lot of belly-hold capacity out of the system — both airlines ran dedicated freighters and passenger-aircraft conversions to meet cargo demand.

It’s not just Korean and Asiana, though. United and Lufthansa also reported strong cargo revenues, but these revenues were not enough to offset dismal passenger losses for either airline.

There’s a bit of a capacity crunch for cargo worldwide, and that’s because international passenger traffic is so low. Without the belly-hold capacity from those flights, cargo load factors rose almost 12 points in June reaching the highest level IATA has reported since 1990. This means yields, too, are up.

But it’s still a depressed market. Online shopping and shipments of medical equipment are boosting the sector now, but it had been on a long march down for months before the pandemic, as trade tensions took a bite out of international commerce. Cargo demand fell by 18% in June and 20% in May, compared with the same months in 2019. One factor, of course, is that many large economies around the world are in Covid recessions. The other is air cargo’s costs. Shippers are turning to maritime and rail freight transport to cut costs, especially now that the urgent need for medical equipment has diminished, IATA said.

Madhu Unnikrishnan

August 10th, 2020

Photo credit:  Korean Air

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