Korean Air doubled its net profit in 2022 thanks to the recovery of passenger traffic in Southeast Asia, Oceania, and Japan. However, cargo generated lower revenues due to the slowdown of the global economy, the airline reported on February 1. Korean Air grows net profit as passenger traffic recovers.
The airline group ended the year with a net profit of KRW 1.8 trillion, up from KRW 639 billion in 2021. The operating profit was KRW 2.9 trillion compared to KRW 1.5 trillion in the previous year.
Passenger revenues increased to KRW 4.4 trillion from KRW 1.1 trillion. Over the full year, cargo revenues were higher than pax revenues at KRW 7.7 trillion versus KRW 6.6 trillion. But looking at Korean’s Q4, there was a noticeable shift. Cargo still generated KRW 1.5 trillion in revenues, but this was lower than KRW 2.2 trillion in the same quarter of record-year 2021 and the lowest of all quarters last year. Even the traditional peak season in Q4 was unable to make up for that.
In contrast, Korean’s passenger revenues went the other way in Q4 to KRW 1.7 trillion, up from KRW 380 billion in the same quarter a year earlier. It confirmed the trend seen since the third quarter when capacity on leisure routes to Europe and Southeast Asia was restored. Revenues on routes to the Americas continued to be the strongest of all (+249 percent), although percentage-wise the biggest growth was seen in Oceania (+1547 percent), Japan (+1408 percent), Southeast Asia (+903 percent), and Europe (+683 percent).
Like all airlines, Korean Air was confronted with higher operating expenses. They increased to KRW 1.1 trillion for the full year versus KRW 729 billion in 2021. Fuel costs accounted for KRW 401 billion, up from KRW 180 billion, the result of higher fuel prices but also more flying and hedging effects. Consumption for Q4 was nineteen percent higher year on year. Labor costs were also higher by KRW 136 billion thanks to wage increases and lower temporary leave.
Passenger demand not affected by inflation
Although Korean Air is concerned about an economic downturn and high inflation, this is not seen in passenger demand. This continues to be strong as the Covid-pandemic has turned endemic and key markets like China and Japan are opening up. The weak Japanese yen makes the country attractive to South Koreans for leisure visits while the Americas and Europe see continued growth for leisure and business travel. The carrier will resume flights to Prague and Zurich at the end of March and to Istanbul and Madrid at the end of April.
The concerns are more evident in cargo, which is directly affected by higher inflation, lower demand, and higher oil prices. The normalization of China offers opportunities to recover lost ground, but overall, Korean Air eyes more cooperation with other global forwarders to secure fixed demand and revenues.
Korean Air ended the year with 155 aircraft, net up one over 2021 thanks to the arrival of the first Airbus A321neo. It also received five Boeing MAX 8s but retired two 737-800s, two 777s, as well as one 747-8i. This is the aircraft that was used as VIP aircraft by the government.
