Korean Air has reported W238.3 billion (USD 219 million) in operating profit for 2020, 17 percent below 2019 figures, thanks to the airline’s strong cargo business and company-wide efforts to cut costs.
Due to COVID-19, the significant fall in passenger demand resulted in a 40 percent drop in revenues to W7.4 trillion (USD 6.806 billion), the flag carrier said in a statement.
Total operating expenses were down 40 percent year on year, reflecting the significant decline in passenger capacity (passenger revenues nose dived 74 percent) and falling oil prices. Other operating costs, such as facility fees and labour costs, were also reduced.
Meanwhile, cargo revenue soared 66 percent, thanks to full utilisation of its 23 freighters, a 25 percent increase in freighter operations from the previous year, as well as the deployment of idle passenger capacity.
“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,” it said in a statement.
Korean Air noted there was an increase in demand for Covid-19 diagnostic kits and automobile parts, whilst some cargo demand shifted from sea to air freight.
The airline ended the year in dire straits with a net loss of W228.1 billion (US$209.7 million), attributed to net interest expense, narrowed from 2019’s W568.7 billion(US$505.4 million) net loss.
In 2020, Korean Air raised W1.1 trillion (US$977.6 billion) worth of capital by issuing new shares and from completing the sale of its in-flight catering and duty-free business unit at W981.7 billion (US$872.2 million).
The carrier is also looking to liquidate non-core assets, including the sale of subsidiaries KAL Limousine and Wangsan Leisure Development, which are being finalised; selling shares in Hanjin International Corp, which operates the Wilshire Grand Centre in Los Angeles; and the sale of property in downtown Seoul to the Seoul metropolitan government.
Citing IATA’s grim 2021 forecast for passenger demand to remain at 50 percent of 2019’s pre-Covid levels, Korean Air said it will continue its self-rescue efforts to improve its financial stability in 2021.
The airline plans to issue new shares this March valued at W3.3 trillion (US$2.9 billion) for liquidity purposes and the Asiana purchase. It added that a post-merger integration of Asiana Airlines will happen as planned.
“Despite the crisis the airline industry is facing, Korean Air’s decision to acquire Asiana was inevitable to enhance the market’s competitiveness and minimize the injection of public funds,” the carrier said.
For this year, voluntary leave for employees will continue on rotational basis as they have since April 2020. It also said it will maintain passenger capacity at current levels until the end of 2021, “when the market indicates meaningful recovery with the Covid-19 vaccine”.
The carrier plans to strengthen its cargo business by keeping freight capacity flexible whilst proactively responding to market changes, stating:
“With a task force of specialists in cargo sales and specialised 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 widely available.”