Korean Air reported a record-breaking revenue in 2023, surpassing pre-pandemic levels and defying headwinds with impressive gains in passenger travel. However, a Q4 loss cast a shadow on the otherwise stellar full-year performance.
In 2023, the Korean flag carrier achieved a record-high revenue of KRW 14.5751 trillion (USD 11.3 billion) and an operating profit of KRW 1.5869 trillion (USD 1.23 billion). Notably, the fourth fiscal quarter marked a pinnacle with a record-high quarterly revenue of KRW 3.9801 trillion (USD 3.09 billion).
While the airline posted a record-high revenue in Q4, it also reported a net loss of KRW 234.59 billion (USD 176 million), as compared to a net profit of KRW 353.98 billion last year.
Outpacing 2019
Despite Q4’s loss, Korean Air reported a higher operating profit for the full year of 2023 compared to 2019, boasting a 10.9% operating profit margin – surpassing the industry average. The fourth quarter’s year-on-year decrease in operating profit was attributed to an increase in staff wages that included incentives for achieving annual performance and safety performance targets.
Despite operating at only 80% of pre-pandemic network capacity, higher premium class travel fueled a surge in passenger revenue, surpassing 2019 levels.
“Annual passenger business revenue increased compared to 2019, driven by strong travel demand and higher premium class demand despite network capacity only recovering to 80 percent of pre-pandemic levels,” stated the airline statement.
Korean Air anticipates a full passenger demand and capacity rebound in the first quarter of 2024, with long-haul routes remaining popular and tourist destinations in Southeast Asia and Japan poised for a boost.
“Korean Air anticipates passenger demand and capacity to fully recover in Q1. Long-haul demand is expected to remain robust, and the airline forecasts the recovery of tourism demand during the peak winter season to boost revenue. Korean Air will maximize revenue by resuming routes and increasing capacity to popular tourist destinations in Southeast Asia and Japan,” the airline stated.
Korean Cargo Navigates New Skies
While cargo revenue dipped from pandemic highs due to the return of passenger belly cargo, the sector maintained profitability even compared to 2019.
Korean Air stated that the cargo business performed strongly during the pandemic due to global supply chain issues, ocean freight bottlenecks, and limited aircraft belly cargo capacity. However, with the recovery of the air cargo industry post-pandemic, cargo operating profit decreased year-on-year.
Looking forward to the first quarter of 2024, uncertainties persist in the air cargo sector, particularly in traditional items like semiconductors, automobiles, and displays, due to a weakened global economy.
Korean Air aims to navigate the cargo sector by flexibly responding to robust e-commerce demand while addressing supply chain uncertainties arising from global geopolitical risks.
Merger with Asiana in Sight
The successful integration of Asiana Airlines, with its strong domestic network, could propel Korean Air towards regional dominance. However, the merger’s actual timing and probable impact on the operation remain crucial elements to consider in the future outlook. Japan has approved the merger.
Overall, Korean Air’s 2023 performance was a mix of record-breaking revenues and unexpected operating costs. While the fourth quarter loss raises concerns, the airline’s ongoing planning, and commitments, point towards a promising 2024, with a focus on optimizing operating costs and capitalizing on the expected full recovery in passenger demand.
