Korean Air adapts in transition to normalcy
Containers are being loaded onto a Korean Air cargo plane in this photo taken in 2020. Korea Times file
By Yi Whan-woo
Korean Air is consolidating its unrivaled market position here at a time when businesses are trying to transition to a new normal, while still struggling amidst the ongoing COVID-19 pandemic.
The country's flag carrier is expected to post a quarterly profit as high as 550 billion won ($464.8 million) for the October-December period, which could make it the only international airline that has stayed in the black for seven straight quarters.
Such a performance is underpinned by its robust cargo business, which the company has strategically fostered to defy a steep drop-off in passenger traffic due to pandemic-induced travel restrictions.
While a return to normalcy will undoubtedly give a boost to airlines across the board, Korean Air is anticipated to become a major beneficiary.
The process is underway for Korean Air to take over cross-town rival Asiana Airlines, meaning that there will be higher chances of domestic travelers choosing Korean Air when going on long-haul flights.
“It doesn't matter whether Omicron lasts long or not, because the company will only get better,” an industry source said, noting that the latest coronavirus variant dealt a setback to the nascent recovery in international flights.
A Korea Investment & Securities analyst expected that Korean Air's operating profit will reach 550 billion won in the fourth quarter, while another analyst, Yang Ji-hwan from Daishin Securities, estimated that it will reach 538.3 billion won.
The two estimated figures will be an improvement from the 438.6 billion won of the third quarter in 2020, when the company's operating profit surged by 5,671 percent year-on-year, then climbed back to the 400 billion range, for the first time in five years, where it stayed for six consecutive quarters.
Quarterly sales in the October-December period are estimated to rise by 42.1 percent year-on-year to 2.7 trillion won, breaking the previous quarterly record of 1.65 trillion won set in the July-September period.
“Korean Air can be said to be the only airline that defeated the pandemic,” the Korea Investment & Securities analyst said, adding, “It is widening the gap with other international competitors.”
Yang attributed Korean Air's performance to all-time high exports this year and the increased demand for air freight. “The boom in the air cargo business is likely to carry into next year irrespective of risks associated with Omicron and other possible variants, which make it difficult to normalize flight operations.”
The 2022 outlook remains bright, according to KB Investment and Securities' Kang Sung-jin, because international passenger traffic will eventually recover.
The analyst estimated the overall traffic to be at 58.7 percent of the 2019 demand, with passengers heavily concentrated in long-haul flights.
For Korean Air, the situation could result in a 654.6 percent increase in its number of international passengers. This figure would be equivalent to a 3 trillion-won increase in the company's operating profit.
“The profit will be even higher if the takeover of Asiana is carried out successfully and its customers are absorbed,” an industry source said.
A different source viewed that promptly acquiring Asiana Airlines will be crucial, considering that it has been sinking deeper into debt. Asiana's debt ratio was 3,668.3 percent as of the third quarter.