The reopening of Japan and China helped Korean Air to boost revenues in Q1, but this was offset by higher operating expenses and fuel costs. The airline particularly lost out on cargo revenues, which reflects the global downturn of the economy and lower demand. Korean Air counts on further recovery in Japan and China.
Korean Air reported a KRW 355.4 billion net profit compared to KRW 543.9 billion in the first quarter of last year. The operating profit was KRW 415 billion, down from KRW 788.4 billion. In line with what we have seen at other airlines, revenues were better year on year at KRW 3.2 trillion versus KRW 2.8 trillion.
Passenger revenues grew to KRW 1.8 trillion from KRW 360 billion, the effect of strong demand on routes to North America and Southeast Asia, followed by Europe. China and Japan were almost non-existent in Q1 last year but reported 628 and 2.566 percent higher revenues respectively. Domestic revenues were up by only 43 percent. The load factor recovered to 82.4 percent from 43.6 percent. Traffic was at 82 percent of 2019 levels compared to just 44 percent in Q1 last year.
Cargo revenues fell 51 percent to KRW 1.0 trillion from KRW 2.1 trillion last year. Available cargo tonne kilometers (ACTK) were dowl by eleven percent to 2.7 billion, and cargo tonne kilometers by 21.6 percent to 2.0 billion. Cargo to and from North America saw the biggest drop of 58 percent year on year. There was less demand for full freighter capacity as more belly capacity became available, which pushed rates and yields down.
Operating expenses were up to KRW 2.8 trillion from KRW 2.0 trillion, with fuel costs up 51.4 percent to KRW 1.0 trillion. But non-fuel costs also increased by 31.2 percent to KRW 1.8 trillion. Check here the full 2022 results.
Passenger demand recovers rapidly
In its outlook for Q2, Korean Air says: “Korean Air expects global passenger demand to rapidly recover in Q2, especially with the relaxation of travel restrictions around the world. The airline will continue to normalize its passenger business by increasing capacity and responding flexibly to demand.” Passenger traffic should fully recover in HY2, led by strong leisure demand.
North America continues to be the strongest market, but transit traffic between the Americas to and from Southeast Asia, as well as pent-up demand in this region, will also benefit Korean Air. The carrier will resume more services to Europe that were suspended during the pandemic. Korean Air counts on further recovery of China and Japan, with the Chinese market waiting for the return of group travel and Japan set to generate more traffic.
The cargo market will remain weaker. “Korean Air plans to closely monitor the market and secure new freight demand to expand its revenue scope. The airline also seeks to expand sales opportunities by flexibly utilizing passenger aircraft belly cargo capacity on resuming routes.”
Korean Air ended the quarter with 156 aircraft, one more than in December. It retired one Boeing 777-300ER but took delivery of two Airbus A321neo’s, which has brought the fleet to three for now.
Active as a journalist since 1987, with a background in newspapers, magazines, and a regional news station, Richard has been covering commercial aviation on a freelance basis since late 2016.
Richard is contributing to AirInsight since December 2018. He also writes for Airliner World, Aviation News, Piloot & Vliegtuig, and Luchtvaartnieuws Magazine. Twitter: @rschuur_aero.
