(04 Feb 2021)
Korean Air today reported KRW 7.405 trillion (USD 6.806 billion) in
sales and KRW 238.3 billion (USD 219 million) in operating profit
The decline in passenger demand due to COVID19
continued throughout the year, causing gross sales to fall 40% and
passenger sales to drop 74% year-on-year.
Increasing the operation rate of
freighters and utilizing idle passenger planes resulted in an
increase in cargo sales of 66% on 2019.
profit was achieved because of the airline’s strong cargo business
and company-wide efforts to cut costs. Meanwhile, reduced
passenger capacity and falling oil prices lowered fuel consumption
and jet fuel costs. Related costs such as facility fees were
also reduced due to decreased passenger operations. Labor costs
declined slightly as employees took rotational leave.
Accordingly, total operating expense was reduced by 40% in 2020
compared to 2019.
The airline recorded a net loss
of KRW 228.1 billion (USD 209.7 million) due to net interest
expense, but the loss was largely reduced from KRW 568.7 billion
in net loss of 2019.
international passenger demand (RPK) in 2020 decreased by 75.6%
compared to 2019, international cargo demand (CTK) dropped by 11.8%.
Consequently, most airlines across the world have experienced a deterioration in profits.
To address the challenges caused by the pandemic,
all Korean Air employees have been taking voluntary rotational
leave since April 2020.
“Korean Air’s staff is
committed to overcoming the crisis with one heart,” said Keehong
Woo, Korean Air’s president. “It was not a miracle that 2020 was a
profitable year. It was only possible thanks to our employees’ hard work and sacrifices.”
Korean Air’s remarkable
performance was also based on its achievement in the cargo
business. Despite a sharp drop in air cargo capacity, Korean Air
fully utilized its 23 freighters, increasing its operation rate by
25% compared to the year before.
“Almost 24% of
the global air cargo capacity disappeared last year when airlines
suspended most international flights because of COVID19. However,
Korean Air boosted our cargo operations by operating extra/charter freighters to meet the demands of medical supplies such as
COVID19 test kits and masks. We also increased cargo capacity by
converting passenger jets into freighters. We’ve done well to keep
our cargo network strong and active,” President Woo added.
The airline’s strategy to increase cargo capacity by using
passenger aircraft resulted in the airline transporting cargo on
more than 4,500 flights. Strong air cargo rates, due to reduced
global air freight capacity compared to demand, also contributed
to the airline’s positive performance.
In addition to enhanced cargo operations, Korean Air has expanded
its capital and improved its financial structure through various
self-rescue efforts such as selling non-core assets.
Last year, Korean Air successfully increased KRW 1.1
trillion worth of capital by issuing new shares and completed the
sale of its inflight catering and duty-free business unit at KRW
981.7 billion. Currently, the airline is finalizing the sale of
KAL Limousine and Wangsan Leisure Development Co. Ltd.
Korean Air is seeking to secure more liquidity by selling its
shares in Hanjin International Corp. that operates the Wilshire Grand Center in Los Angeles, and is discussing the sale of the
company’s property in downtown Seoul with the Seoul metropolitan
Korean Air will continue its
self-rescue efforts to improve its financial stability in 2021. In particular, the airline will increase KRW 3.3
trillion worth of capital by issuing new shares this March to
secure liquidity and improve its financial structure while also
resolving financing issues to
acquire Asiana. Korean Air also will
carry out a PMI (Post Merger Integration) to integrate Asiana
Airlines as planned. Employees’ voluntary leave also will be
continued this year.
As the air cargo market
recovers, Korean Air plans to strengthen its cargo business
strategies by flexibly adjusting supply and proactively responding
to changes in the market. With a task force of specialists in
cargo sales and specialized cargo transport, Korean Air has
prepared for vaccine transportation that’s expected to grow
sharply starting the second half of the year when vaccines become
In contrast to the positive air
cargo market, the passenger business is expected to recover
slowly. Accordingly, Korean Air plans to maintain the current
passenger seat capacity until the end of this year when the market
indicates meaningful recovery with the COVID-19 vaccine.
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