Photo credit: Korean Air reported record cargo revenues in the third quarter. Flickr / 72JanJ
Korean Air is “getting ready to return to a more normal life,” as it tentatively adds flights as travel restrictions and quarantine requirements fall. But the carrier has the luxury to be tentative and gradual. It, unlike the vast majority of airlines around the world, has reported profits for several quarters since the early days of the pandemic.
The reason, of course, is cargo. Korean Air reported record third-quarter cargo revenues, beating its previous record by more than 100 billion won ($84 million). Korean Air’s reported 1.65 trillion won in cargo revenues for the quarter ($1.4 billion), up 62 percent from the second quarter. Cargo, in fact, accounted for the lion’s share of Korean Air’s $1.9 billion third-quarter revenue.
The trend is expected to continue. Korean Air cited maritime shipping’s capacity constraints, port congestion around the world, and worker shortages at both ports and shipping lines as reasons for the modal shift to air cargo. The carrier also is anticipating a busy holiday peak season for cargo and is building out capacity at its cargo hubs and developing new airports as logistics centers, it said in its third-quarter earnings report Friday.
Half of the company’s cargo revenue comes from the Americas, another 17 percent from Europe, and the remainder from the Asia-Pacific region, the Korean Air said.
Korean Air operates a fleet of 23 dedicated freighters (four Boeing 747Fs, seven 747-8Fs, and 12 777Fs) and at the end of the third quarter had converted 10 Boeing 777s and six Airbus A330s into “preighters.”
“Strong demand in cargo is not really satisfactory for us,” Korean Air Chairman and CEO Walter Cho said at the end of September. “I would really like passenger demand to come back up because that is the bulk of the business for us, and for the health of the industry.”
The airline expects “passenger demand to remain weak in the fourth quarter,” but it forecasts more countries will relax restrictions in the new year. Asia-Pacific remains the airline industry’s most challenging region, due to strict travel restrictions and quarantine requirements imposed by most of the region’s countries. Vaccination rates in Korea and the key market of Japan are rising, however, after a slow start earlier this year.
Korean Air has begun ramping up frequencies to popular leisure destinations that have relaxed quarantine requirements, the company said in its presentation. Korean Air began flying three times a week to Hawaii and four times a week to Guam in the quarter. It began offering charter vacation flights to Chiang Mai, Thailand, and Spain in the quarter. Passenger demand remains strongest to North America, followed by Korean Air’s domestic network.
The carrier’s acquisition of competitor Asiana is on track, after the company got regulatory approvals from the governments of Malaysia, Taiwan, Thailand, and Turkey. After securing approvals from all jurisdictions, Korean will acquire 63.9 percent of Asiana’s stock, with an aim to fully integrate that carrier into Korean Air within two years.
Korean Air reported a profit of $370 million in the third quarter, up 5,761 percent from last year. Revenues rose 44 percent to $1.9 billion.